A Time Series Analysis of the determinants of Savings in Namibia

Abstract

The driving objective of this article was to empirically establish the determinants of savings in Namibia through the use of co-integration and error correction mechanisms for the period running from 1991 to 2012. We made use of quarterly and annual macroeconomic data sets. The quarterly data used were derived from the annual data set that we used in this study. The article relied heavily on unit root tests, co-integration and error correction procedures as ways of investigating the research issue under consideration. First, the time series characteristics of the variables used were ascertained with the help of the augmented Dickey-Fuller unit root procedure. Second, the long-run relationship between savings and its determinants was examined using the procedure suggested in the literature by Johansen and Juselius.

The results of the co-integration tests suggest that there is a long-run relationship between savings and the explanatory variables used in the study. The results suggest that inflation and income have positive impact on savings, whilst population growth rate has negative effects on savings. Further, deposit rate and financial deepening have no significant effect on savings. Additionally, the results re-enforces the work of Iipumbu et al (1999). Finally, the need to achieve a higher rate of savings in Namibia by improving upon income levels cannot be overstretched.

Key Words: Macroeconomic time series data, Co-integration, Namibia, Savings, Income