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Exchange rate undervaluation and sectoral performance of the South African economy

Author

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  • Bernard Njindan Iyke

Abstract

Purpose - The purpose of this paper is to uncover the channels through which real exchange rate undervaluation influences the performance of the South African economy. Design/methodology/approach - The author decomposes the South African economy into three sectors: agriculture, industry, and services. Specifying a model for each sector, the author employs the ordinary least squares (with Newey-West and robust standard errors) and generalized method of moments estimation techniques. The annual time series data cover the period 1962-2014. Findings - The author finds that real exchange rate undervaluation exerted a positive influence on agriculture and industry, and a negative impact on services. Research limitations/implications - The results have practical policy implications, which are discussed in the paper. Originality/value - Although the growth effect of real exchange rate undervaluation has been well established in the literature, the channels through which this occurs has received limited attention. Prior to this study, no study has considered the impact of real exchange rate undervaluation on the economy through the various sectors in the South African context.

Suggested Citation

  • Bernard Njindan Iyke, 2017. "Exchange rate undervaluation and sectoral performance of the South African economy," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 44(4), pages 636-649, September.
    • Handle: RePEc:eme:jespps:jes-03-2016-0052
    DOI: 10.1108/JES-03-2016-0052
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    Citations

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    Cited by:

    1. John Bosco Nnyanzi & John Bosco Oryema & Nicholas Kilimani, 2022. "Real exchange rate undervaluation, regional integration and services sector performance: evidence from the East African Community," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 11(1), pages 1-23, December.
    2. Bernard Njindan Iyke & Sin-Yu Ho, 2018. "Nonlinear effects of exchange rate changes on the South African bilateral trade balance," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 27(3), pages 350-363, April.

    More about this item

    Keywords

    South Africa; Exchange rate undervaluation; Sectoral performance; C10; F21; F31;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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