An Econometric Analysis of Increased Trade Activities on Namibia's Economy

Abstract

A boost in trade revenue, economic diversification, increased Foreign Direct Investment (FDI), and improved regional integration are some of the reasons the African Continental Free Trade Area (AfCFTA) was established. Amid these positive reasons, there are also concerns about the negative impact of the free trade agreement. Namibia, with a relatively small population and small market share in terms of trade participation within the continent, is less likely to benefit from the AfCFTA. The aims of this study were to explore the relationship between trade flows and Gross Domestic Product (GDP) in Namibia, and to forecast the impact of increased international trade on Namibia`s economy. A robust econometric analysis test was applied to analyse the time series secondary data of real GDP, total trade, export, and import from 1990-2018. The findings showed no causal relationship between the dependent variable GDP and the independent variables; total trade, export, and import. However, increased participation in international trade will benefit the Namibian economy in the long term. Hence, the study finds it beneficial for Namibia to participate in the AfCFTA as a means towards increased trading activities