Pumping resources in financial sector reform will help increase the level of savings by widening the range of available savings instruments and in¬creasing the expected return through higher real interest rates and reduced risks, as deeper markets make financial assets more liquid.

1. SCHOOL OF ECONOMICS AND FINANCE
SCHOOL OF MANAGEMENT
POLYTECHNIC
O F N A M I B I A
transforming into Namibia University of Science and Technology
RESEARCH TOPIC: AN ECONOMETRIC ANALYSIS OF
SAVINGS AND INVESTMENT IN NAMIBIA:
IS SAVINGS REALLY PRIOR TO INVESTMENT?
Name of Student:
OSCAR A MUSILIKA
Econometric Methodology: Unit Root
analysis, Johansen Cointegration analy-
sis and Pairwise Granger Causality test.
Findings: for the studied sample peri-
od 1995-2011; savings and investment
were not cointegrated, which may imply
the existence of capital mobility. Further-
more,aunidirectionalcausallinkbetween
savings and investment was proven to
exist,running from savings to investment.
Based on the experimental findings the following
policy recommendations were made:
 Acombined fiscal and monetary policy initiatives are
needed to ensure equilibrium between domestic re-
sources and financing in the economy. Government
budget targeting would minimize the resource gap
and will bring equality between gross domestic sav-
ings and capital formation in the current account.
 The basic reason for the absence of
long run equilibrium between savings
and investment in Namibia is the decline
in savings in the economy. To address
this, the pattern of investment should be
changed with an objective of promoting
employment and reducing inflation. Pro-
moting savings through various incen-
tives such as income tax reduction, high-
er deposit rates and deepening of the
financial sector should be implemented.
 The efficient use of external aid and
finance to promote growth and savings
is the immediate priority.
 Pumping resources in financial sector reform will
help increase the level of savings by widening the
range of available savings instruments and in-
creasing the expected return through higher real
interest rates and reduced risks, as deeper mar-
kets make financial assets more liquid.
RESEARCH DAY