The Specification and Estimation of a Macroeconometric Model of Botswana

"This paper presents a macroeconometric model of Botswana. The model is specified to capture the supply side of the Botswana's economy and is based on the concepts of the two-gap models as specified by Chenery et al (1962). The special feature of the model is that it incorporates the elements of the Dutch Disease which characterizes this small open economy on account of the predominance of mining and more specially diamond production which has transformed the economy from a low income one at the time of independence twenty five years ago to a middle income economy today. The model endeavours to show the kind of structural change that has accompanied the spectacular growth of the economy. It is categorized into nine blocks and, in order to capture the effects of the Dutch Disease on the economy, output, labour and capital inputs blocks are modelled at the sectoral level."