The Dynamic Effects of Monetary Policy on Real Variables in Namibia

Abstract

The study develops a small macroeconometric model for Namibia by using labour market and monetary variables for the period 1980 to 2013. The study shows the process through which monetary policy affects real (labour market) variables. Using the structural vector autoregression methodology (SVAR), a small macroeconometric model is developed using three modular experiments, namely; the basic model, and models that incorporate demand and exchange rate channel variables to the basic model and specification of the macro-econometric model. The study finds that demand and exchange rate channels variables have important additional information, which explains the monetary transmission process and that shocks to labour market variables affect monetary policy in Namibia.

Keywords: Unemployment, Structural VAR, Impulse response, Variance decomposition, Namibia, macroeconometric modelling