Exchange Rate Volatility and Export Performance in South Africa: (2000-2014) (original) (raw)
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Exchange rate volatility and manufacturing exports in South Africa
Banks and Bank Systems, 2017
The primary objective of this study is to investigate the impact of exchange rate volatility on South Africa’s manufacturing exports to the United States for the period 1990Q1 to 2014Q1. The study employs the EGARCH model to measure exchange rate volatility, and the ARDL bounds tests as developed by Pesaran, Shin and Smith to determine the longrun and short-run effects of exchange rate volatility on the country’s manufacturing exports. The study also carries out a Granger causality test between real exchange rates and exports of manufactured products. The study results show that an increase in exchange rate volatility has a significant positive effect on manufacturing exports in the long run. However, the results are insignificant in the short run. It is also found that real exchange rates Granger cause manufacturing exports. Manufacturing exports, however, do not Granger cause real exchange rates.
The Impact of Exchange Rate Volatility on South African Exports
Exchange rates have been highly volatile in South Africa especially after the end of the Bretton Woods system and this has raised a lot of debate amongst interested parties in South Africa such as the South African government and the Congress of South African Trade Union. Therefore, this paper investigates the impact of exchange rate volatility on aggregate South African exports flows to the rest of the world for the period 2000 to 2009. The results obtained suggest that, there exist no statistically significant relationship that is there is an ambiguous relationship between South African exports flows and exchange rate volatility. Although the results were not robust, at the same the study found some sensitivity of South African exports to movements of the exchange rate. We find that, depending on the measure of volatility used, exchange rate volatility either does not have a significant impact on South Africa's exports flows, or it has a positive impact on aggregate goods and services.
Review of Economic and Business Studies, 2011
This research paper empirically examines the impact of real exchange rate volatility on trade in the context of South Africa's exports to the U.S. for the South Africa's floating period January 1995-February 2007. In measuring real exchange rate volatility, this study utilised GARCH. After establishing the existence of cointegration among the variables involved in our two-country export model, we estimated long-run coefficients by means of ARDL bounds testing procedure proposed by Pesaran, et al.(2001). Our results indicate that real exchange rate volatility exerts a significant and negative impact on South Africa's exports to the U.S. Therefore, stable and competitive exchange rate and sound macroeconomic fundamentals are required in order to improve international competitiveness and greater penetration of South African exports to international markets.
Journal of economics and sustainable development, 2013
This research empirically analyses the relative impacts of real exchange rate misalignment and real exchange rate volatility on export growth in South Africa. The sample period for the study spans from 2000:2 to 2011:4. The degree of real exchange rate misalignment is computed as a deviation of the actual real exchange rate from its equilibrium using a single-equation error correction approach, while volatility is computed using the GARCH technique. The relative impacts of real exchange rate misalignment and real exchange rate volatility are investigated using the one-step Engle-Granger error correction model (ECM). Results indicate that both real exchange rate misalignment and real exchange rate volatility have adverse impacts on export growth; with real exchange rate volatility demonstrating more pronounced detrimental impacts on export growth relative to exchange rate misalignment, both in the short-run and long-run periods.
Export Performance and Exchange Rate Volatility: Evidence from the Wamz
This paper examines the relationship between exchange-rate volatility and export performance in the WAMZ countries using quarterly data for the period 1990-2010. The paper utilizes the Engel-Granger Dynamic OLS (DOLS) estimation technique as well as the Generalized Auto Regressive Conditional Heteroskedasticity (GARCH) approach to model the real exchange rate volatility. In conformity with theoretical considerations, the results indicate that increases in the exchange-rate volatility exert a significant negative effect upon export in Liberia, Nigeria and Sierra Leone. While a positive relationship is established in the case of The Gambia, exchange-rate volatility impact on Ghana and Guinea is insignificant. The results also reveal a positive relationship between terms of trade and export performance for all the countries, indicating that improvement in terms of trade trigger increases in export performance in the WAMZ countries. Income from the rest of the world is found to have a p...
The determinants of real exchange rate volatility in South Africa
The World Economy, 2020
This paper investigates the determinants of exchange rate volatility in South Africa for the period 1986-2013 using the New Open Economy Macroeconomics model by Obstfeld & Rogo¤ (1996) and Hau (2002). The main focus of the paper is to test the hypothesis that economic openness decreases Rand (ZAR) volatility. This follows South Africa's liberalisation of its capital account in the mid-1990s and the mixed results in the literature on the relationship between exchange rate volatility and economic openness. Employing monthly time series data, GARCH models are estimated. The study …nds that switching to a ‡oating exchange rate regime has a signi…cant positive e¤ect on ZAR volatility. The results also indicate that trade openness signi…cantly reduces ZAR volatility only when bilateral exchange rates are used, but …nds the opposite when multilateral exchange rates are used. The study also …nds that volatility of output, commodity prices, money supply and foreign reserves signi…cantly in ‡uence ZAR volatility.
The real exchange rate has proven to be an important factor in international trade because it is expected that exports respond to real exchange rate movements with respect to the characteristics of the importing and exporting countries. Exchange rate volatility increases uncertainty of profits on contracts denominated in foreign currency and subsequently dampens trade and economic growth. This study investigated how real exchange rate volatility affected exports of key Kenyan commodities to the European Union and United Kingdom, namely; tea, coffee and horticulture to the European Union. The presence of exchange rate volatility was determined using the GARCH model. A Bounds testing and Autoregressive Distributed Lag model was used to establish the presence of a long run relationship between exchange rate volatility and commodity exports. Findings revealed that exchange rate volatility affected tea exports to the UK and horticulture exports to the European Union. Foreign income played an important role in explaining tea and coffee exports to the UK and EU respectively.
Analysis of Volatility of Real Exchange Rate and Exports in Kenya using the Garch Model: 2005:2012
2015
The real exchange rate has proven to be an important factor in international trade because it is expected that exports respond to real exchange rate movements with respect to the characteristics of the importing and exporting countries. Exchange rate volatility increases uncertainty of profits on contracts denominated in foreign currency and subsequently dampens trade and economic growth. This study investigated how real exchange rate volatility affected exports of key Kenyan commodities to the European Union and United Kingdom, namely; tea, coffee and horticulture to the European Union. The presence of exchange rate volatility was determined using the GARCH model. A Bounds testing and Autoregressive Distributed Lag model was used to establish the presence of a long run relationship between exchange rate volatility and commodity exports. Findings revealed that exchange rate volatility affected tea exports to the UK and horticulture exports to the European Union. Foreign income played an important role in explaining tea and coffee exports to the UK and EU respectively.
Exchange Rate Volatility and Exports: The Nigerian Scenario
Asian Journal of Empirical Research
This paper investigated the impact of exchange rate volatility on exports in Nigeria utilizing data from 2005Q1 to 2020Q4. The ARCH model and its extensions of GARCH, TARCH and EGARCH models and nominal effective exchange rate were employed to measure exchange rate volatility. The Autoregressive Distributed Lag Bounds test methodology was used to examine the short-run and long-run effects of exchange rate volatility on exports. The findings validated the presence of exchange rate volatility. In addition, the results revealed that exchange rate volatility had a negative and insignificant impact on exports. The study, thus, recommends that the government of Nigeria through the Central Bank of Nigeria should foster stable regimes of exchange rate through the implementation of appropriate policies of the exchange rate. Also, an enabling environment for the production of exportable goods should be provided by the government.
Does Exchange Rate Volatility Harm Exports? Evidence from Mauritius
Mauritius is a small island economy, dependent on trade and highly influenced by changes in world demand and currency fluctuations. This paper empirically investigates the impact of real effective exchange rate volatility on the Mauritian export performance from 1975 to 2007. Exchange rate volatility is derived from the moving average standard deviation method since no GARCH effect was obtained. The empirical results based on the ARDL analysis show that real exports are cointegrated with foreign economic activity, real effective exchange rate and volatility of real exchange rate. Our findings reveal that exchange rate volatility has a positive and significant short run effect on exports, whilst in the long run; volatility adversely affects the Mauritian exports. It thus becomes crucial to consider both the existence and the degree of exchange rate volatility for the implementation of appropriate trade policies to improve the country’s export performance and trade balance.