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The Impact of Real Exchange Rate Volatility on South African Exports to the United States (U.S.): A Bounds Test Approach

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  • Lira SEKANTSI

    ()
    (Department of Economics, National University of Lesotho,P.O. Roma 180, Maseru 100 Lesotho)

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    Abstract

    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.accounting and taxation, we applied the method proposed in 1998 by Lamb et al. and developed by Nobes et Schwenke (2006). Six cases are available: from disconnection (case I) to identity (case II), through the various cases of influence on accounting aver taxation or vice-versa. Despite the short period considered (20 years), our results confirm a de jure disconnection between Romanian financial accounting and tax accounting, as suggested by Petre and Lazar (2006). But, one should not to much rely on appearances: in many cases, the accounting practice in Romania (especially SMEs) in marked by a close relationship with taxation.

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    Bibliographic Info

    Article provided by Alexandru Ioan Cuza University, Faculty of Economics and Business Administration in its journal Review of Economic and Business Studies.

    Volume (Year): (2011)
    Issue (Month): 8 (December)
    Pages: 119-139

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    Handle: RePEc:aic:revebs:y:2011:i:8:sekantsil

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    Related research

    Keywords: exchange rate volatility; Autoregressive distributed lag (ARDL); Generalised Autoregressive Conditional Heteroskedasticity (GARCH) Bounds testing; unit root; Error Correction model; Cointegration;

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    References

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    1. Arize, Augustine C & Osang, Thomas & Slottje, Daniel J, 2000. "Exchange-Rate Volatility and Foreign Trade: Evidence from Thirteen LDC's," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(1), pages 10-17, January.
    2. Riedel, James, 1988. "The Demand for LDC Exports of Manufactures: Estimates from Hong Kong," Economic Journal, Royal Economic Society, vol. 98(389), pages 138-48, March.
    3. Andreas Savvides, 1992. "Unanticipated exchange rate variability and the growth of international trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 128(3), pages 446-463, September.
    4. Antonio Aguirre & Afonso Ferreira & Hilton Notini, 2007. "The Impact of Exchange Rate Volatility on Brazilian Manufactured Exports," Económica, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, vol. 0(1-2), pages 3-19, January-D.
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    6. Peree, Eric & Steinherr, Alfred, 1989. "Exchange rate uncertainty and foreign trade," European Economic Review, Elsevier, vol. 33(6), pages 1241-1264, July.
    7. Riedel, James, 1989. "The Demand for LDC Exports of Manufactures: Estimates from Hong Kong: A Rejoinder," Economic Journal, Royal Economic Society, vol. 99(396), pages 467-70, June.
    8. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
    9. Choudhry, Taufiq, 2005. "Exchange rate volatility and the United States exports: evidence from Canada and Japan," Journal of the Japanese and International Economies, Elsevier, vol. 19(1), pages 51-71, March.
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    12. Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
    13. Paul De Grauwe, 1988. "Exchange Rate Variability and the Slowdown in Growth of International Trade," IMF Staff Papers, Palgrave Macmillan, vol. 35(1), pages 63-84, March.
    14. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    15. Doroodian, K., 1999. "Does exchange rate volatility deter international trade in developing countries?," Journal of Asian Economics, Elsevier, vol. 10(3), pages 465-474.
    16. Shin, Yongcheol, 1994. "A Residual-Based Test of the Null of Cointegration Against the Alternative of No Cointegration," Econometric Theory, Cambridge University Press, vol. 10(01), pages 91-115, March.
    17. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
    18. Glauco De vita & Andrew Abbott, 2004. "The Impact of Exchange Rate Volatility on UK Exports to EU Countries," Scottish Journal of Political Economy, Scottish Economic Society, vol. 51(1), pages 62-81, 02.
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