DETERMINANTS OF ECONOMIC GROWTH IN BOTSWANA THROUGH THIRLWALL'S MODEL

Peo Nnang Naima Baitsile

Working Papers from African Economic Research Consortium

Abstract: The purpose of this paper is to estimate economic growth of Botswana. The study relies on the Thirlwall's model and its extension to estimate the price and income elasticities of export and import demand using the productivity data for the period of 1980-2016. The estimation for this work is based on the Auto-Regressive Distributed Lag, (ARDL), modeling to estimate the price and income elasticities, which is based on the conventional equations of exports and imports demand. The practical application of the estimated elasticities provides insights about the determinants of the economic growth of the Republic of Botswana, thus, the Thirlwall's hypothesis of balance of payments constrained growth is used. The results from the imports and exports equations showed the following. The estimated price elasticities of demand for imports and exports were unexpected and statistically insignificant. The estimated income elasticities of demand for imports and exports were as expected and statistically significant. From the extended imports and exports equations, the price elasticities of imports were unexpected and statistically significant. The income elasticity of imports and exports were as expected and statistically significant. Practical applications of the estimated price and income elasticities of demand for imports and exports gave the economic growth rates of 5.63 percent and 4.97 percent respectively for the Thirlwall and extended Thirlwall's model with the export growth rate of 4.87 percent. The overall results indicated that Thirlwall hypothesis holds in determining Botswana's economic growth rate. This correlated with the study done by Matsheka in 1998, where when calculating Botswana's economic growth rate, the results showed that Botswana's economic growth rate could be predicted using the Thirlwall's model.

Date: 2020-05-06
Note: African Economic Research Consortium
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