The Effects of Commodity Prices on Namibia’s Business Cycles

The study examined the effects of price shocks in the price of mineral commodities (copper and uranium) on Namibia’s business cycles (real GDP) from 1980 – 2018. To estimate the impact of positive and negative changes in commodity prices on business cycles, the study adopted a stepwise least square, Nonlinear Autoregressive Distributed Lag (NARDL) model, and Wald tests to determine cointegration and the presence of asymmetric effects. The findings reveal a long-run cointegration among business cycle (real GDP), commodity (copper and uranium) prices, investment, and export shares of GDP. Moreover, the study unveiled that copper and uranium prices have an asymmetric impact on Namibia’s business cycle. Specifically, positive changes (appreciations) for copper and uranium prices significantly impact real GDP more than negative changes (depreciations). Overall, this study supports the Prebisch-Singer Hypothesis, which underscores the importance of industrialisation.