Page 19 - 3-Windhoek (10 April 2024)(SESSION 2) Graduation e-BOOK

School of Business Management, Governance & Economics
FACULTY OF COMMERCE,
MANAGEMENT & LAW

DOCTOR OF PHILOSOPHY
IN ECONOMICS
CANDIDATE: JULIUS Evelina T
Posthumous
CANDIDATE’S DISSERTATION

THE MACROECONOMIC EFFECTS OF FISCAL POLICY
IN NAMIBIA
The doctoral study was undertaken and completed
under the supervision of Prof. Jacob M. Nyambe (Main
Supervisor) and Prof. Emmanuel Ziramba (Co-Supervisor), both from
the University of Namibia.

The candidate explored the effect of fiscal policy on the economy of
Namibia, while establishing the limits that exist in using fiscal policy as
a reactionary tool.
Using a Dynamic Stochastic General Equilibrium (DSGE) model, it was
found that government consumptive spending has a positive impact
multiplier in the period following a revenue shock to the economy.
These impacts are however short-lived as the they die out in the
short- to medium-term depending on the size of the shock. In order to
establish the level of fiscal policy that brings fiscal debts to their historical
values thereby creating fiscal space, a debt targeting analysis was
performed. The results indicated that it is not enough to only reduce
the primary deficit if the country is to guarantee fiscal sustainability, but
it is also important to grow the economy and improve the ability for
debt repayment so that debt accumulation slows. It was further shown
that targeting a certain level of fiscal deficit may require the country to
first target a balanced or current account surplus. The study indicated
that causality runs from the current account deficit to a fiscal deficit.
This implies that targeting a certain level of fiscal deficit may require
Namibia to first target a balanced or current account surplus.

The study concludes that fiscal policy in Namibia remains a critical tool
especially due to the country’s membership in the Common Monetary
Area that limits how it can independently use monetary policy as a
reactionary tool. However, the way the country uses fiscal policy as a
reactionary tool matter, as the impact on the economy may depend
on whether the reaction is consumption-oriented or investment-
oriented.

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