IDEAS home Printed from https://ideas.repec.org/a/afj/journl/v10y2008i2p43-59.html
   My bibliography  Save this article

South African "Rand"/U.S. "Dollar" Exchange Rate Variability, Parity Theories, and Investment Rules

Author

Listed:
  • Stephen S. Kyereme

    (Webster University)

Abstract

Parity theories are used to study the "rand" / "dollar" rate. Interest rate parity results suggest that in about 20% to 26.7% of cases, investing in USA would have yielded higher interest returns than investing in South Africa. In 73.3% to 80% of cases, investing in South Africa would have yielded more interest returns. The PPP theory suggests rand undervaluation relative to the dollar, thereby justifying revaluation / appreciation in all cases, while the interest rate parity theory suggests rand undervaluation in 73.3% to 80% of cases and overvaluation in 20% to 26.7% of cases. Cointegration tests suggest significant (at 5% but not at 1%) long run PPP, which is consistent with the high correlation (0.97) between the two countries’ price levels.

Suggested Citation

  • Stephen S. Kyereme, 2008. "South African "Rand"/U.S. "Dollar" Exchange Rate Variability, Parity Theories, and Investment Rules," The African Finance Journal, Africagrowth Institute, vol. 10(2), pages 43-59.
    • Handle: RePEc:afj:journl:v:10:y:2008:i:2:p:43-59
    as

    Download full text from publisher

    File URL: http://www.journals.co.za/ej/ejour_finj.html
    Download Restriction: no
    ---><---

    More about this item

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:afj:journl:v:10:y:2008:i:2:p:43-59. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk De Doncker (email available below). General contact details of provider: https://edirc.repec.org/data/afrgrza.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.