An Estimate of An Optimal Level of Inflation in Namibia

Sustaining economic growth and ensuring price stability are two of the most important macroeconomic policy objectives of any economy. There appears to be a consensus among economists that macroeconomic stability, specifically defined as low inflation, is negatively related to economic growth. Hence, rapid output growth and low inflation are the most common objectives of macroeconomic policy. An empirical investigation of the inflation-economic growth relationship to determine whether a threshold effect exists and if so to estimate the optimal inflation level which is conducive for economic growth in Namibia. The result reveals that a threshold level of inflation must be at 12.0 per cent, which is conducive for economic growth in Namibia.