Exchange Rate Uncertainty Effects on Domestic Investment in South Africa

2021 ◽  
Vol 15 (3) ◽  
pp. 338-352
Author(s):  
Hiluf Techane Gidey ◽  
Naser Yenus Nuru
Keyword(s):  
Exchange Rate ◽  
South African ◽  
Jel Classification ◽  
Real Effective Exchange Rate ◽  
Impulse Response Functions ◽  
Response Functions ◽  
Domestic Investment ◽  
Exchange Rate Uncertainty ◽  
Effective Exchange ◽  
Effective Exchange Rate

The main goal of this study is to examine the effect of real effective exchange rate uncertainty on domestic investment for the South African economy over the sample period 1985Q1–2019Q2. To address this objective, Jordà’s (2005) local projection method is employed in this study. The generalised impulse response functions indicate that domestic investment decreases between the second and seventh quarters in response to one standard deviation shock in exchange rate uncertainty. Furthermore, high exchange rate uncertainty affects domestic investment negatively while low exchange rate uncertainty affects domestic investment positively. In other words, domestic investment declines due to a rise in exchange rate uncertainty while a drop in exchange rate uncertainty enhances domestic investment. Regarding the effects of control variables, output and export influences domestic investment positively and significantly. Inflation, however, has a negative and significant effect on domestic investment. Lastly, the Diks–Panchenko nonlinear Granger’s causality confirms bidirectional causality between exchange rate uncertainty and domestic investment. JEL Classification: C32, E22, F31, F41

scholarly journals Macroeconomic Effects of Global Food and Oil Price Shocks to the Pakistan Economy: A Structural Vector Autoregressive (SVAR) Analysis.

2011 ◽  
Vol 50 (4II) ◽  
pp. 491-511 ◽  
Author(s):  
Muhammad Arshad Khan ◽  
Ayaz Ahmed
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Inflation Rate ◽  
Food Price ◽  
Oil Price ◽  
Real Effective Exchange Rate ◽  
Impulse Response Functions ◽  
Price Shocks ◽  
Effective Exchange ◽  
Effective Exchange Rate

This study examines the transmission channels through which the global food and oil price shocks affects selected macroeconomic variables including inflation rate, output, money balances, interest rate and real effective exchange rate for Pakistan using monthly data over the period 1990M1-2011M7. An empirical analysis is carried out by employing structural vector autoregressive (SVAR) framework. Generalised Impulse Response Functions and Generalised Forecast Variance Decompositions are employed to track the impact of oil and food price shocks to Pakistan‘s economy. Results suggest that oil price shock affects industrial production, appreciates real effective exchange rate negatively and affect inflation and interest rate positively. Whereas, following food price shocks, industrial output increases. Similarly, interest rate and inflation rate responds positively following food price shocks. However, the variation in interest rate due to food price shock is relatively larger than that of oil price shocks. Generalised impulse response functions reveal that real effective exchange rate is most important source of disturbances following either oil price or food price shocks. Generalised forecast variance decompositions analysis also supports the findings based on generalised impulse response functions. The result clearly reveals that oil and food price shocks significantly affect output, short-term interest rate, inflation rate and real effective exchange rate. However, among all, real effective exchange rate has seen a dominant source of variations in Pakistan. This implies that supply-side and demand-side disturbances originated by external shocks are the major sources of inflation (stagflation) in Pakistan. Keywords: Oil and Food Price Shocks, SVAR, GIRFs, GFEVDs, Pakistan

scholarly journals The Impact of Exchange Rate Uncertainty on Exports in South Africa

2015 ◽  
Vol 06 (01) ◽  
pp. 1550004 ◽  
Author(s):  
Goodness C. Aye ◽  
Rangan Gupta ◽  
Prudence S. Moyo ◽  
Nehrunaman Pillay
Keyword(s):  
South Africa ◽  
Exchange Rate ◽  
Real Effective Exchange Rate ◽  
Structural Vector Autoregression ◽  
Exchange Rate Uncertainty ◽  
Effective Exchange ◽  
Negative Effect ◽  
Effective Exchange Rate ◽  
The Impact ◽  
Structural Vector

This paper examines the impact of real effective exchange rate uncertainty (REER) on aggregate exports of South Africa for the period 1986Q4–2013Q2. Using a bivariate framework where the structural vector autoregression (VAR) is modified to accommodate bivariate GARCH-in-Mean (GARCH-M) errors, we find that exchange rate uncertainty has a significant and negative effect on exports. Comparing the response of exports to a shock in exchange rate from a model that includes the REER uncertainty with results from a model that restricts the coefficient of the exchange rate uncertainty to zero, we find that the response is more pronounced in the former model. Furthermore, real exports respond asymmetrically to negative and positive shocks of REER of the same size.

scholarly journals Currency Depreciation, Trade Balance and Intra-Industry Trade Interactions in Turkey’s OECD Trade

2016 ◽  
Vol 8 (4) ◽  
pp. 8 ◽  
Author(s):  
Mehmet Demiral
Keyword(s):  
Exchange Rate ◽  
Trade Balance ◽  
Real Effective Exchange Rate ◽  
Series Data ◽  
Adjustment Process ◽  
Industry Trade ◽  
Long Run ◽  
Effective Exchange ◽  
Short Run ◽  
Effective Exchange Rate

<p>This study re-examines the determinants of Turkey’s trade balance in its manufactures trade with 33 OECD-member countries for the short-run and the long-run. Unlike other studies, in the relationships we also control the moderating effects of the availability of import substitutes proxied by intra-industry trade. We analyze quarterly aggregated time-series data of the period spanning from 1998.QI to 2015.QIII, following the autoregressive distributed lag (ARDL) bounds testing approach to the cointegration and the error correction modeling. Estimation results reveal that real effective exchange rate, together with domestic and foreign incomes are still among the core determinants of Turkey’s trade balance in the manufacturing sectors. There is no significant impact of domestic final oil prices that also include all the taxes on gasoline. The trade balance depends on domestic income negatively and the aggregated income of the OECD countries positively. The finding that real depreciation of Turkish lira against to those of Turkey’s OECD trade partners improves trade balance in both the short-run and the long-run, indicates no evidence of J-curve adjustment process. Unsurprisingly, the intra-industry trade seems to be an important factor that moderates the elasticities of trade balance to its determinants, especially to real effective exchange rate and domestic income. Overall results underline the importance of import-substitution capability besides the export-oriented production to ease the longstanding large trade deficits for Turkey.</p><strong></strong>

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