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The Impact of Monetary and Commodity Fundamentals, Macro News and Central Bank Communication on the Exchange Rate: Evidence from South Africa

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  • Balazs Egert

Abstract

This paper studies drivers of high-frequency (daily) dynamics of the South African rand vis-à-vis the dollar from January 2001 to July 2007. We find strong nonlinear effects of commodity prices, perceived country and emerging market risk premium and changes in the dollar-euro exchange rate on changes in daily returns of the rand-dollar exchange rate. We also identify a one-sided nonlinear mean reversion to the long-term monetary equilibrium. In addition we establish very short-lived effects on the exchange rate of selected macroeconomic surprises and central bank communication aimed at talking up the rand.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2009/wp-cesifo-2009-04/cesifo1_wp2612.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2612.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2612

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Keywords: exchange rate; nonlinearity; commodity prices; monetary model; macroeconomic news; central bank communication; South Africa;

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References

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Cited by:
  1. Balazs Egert & Evžen Kocenda, 2013. "The Impact of Macro News and Central Bank Communication on Emerging European Forex Markets," CESifo Working Paper Series 4288, CESifo Group Munich.
  2. Rafik Nazarian & Ashkan Amiri, 2014. "Asymmetry of the Oil Price Pass–Through to Inflation in Iran," International Journal of Energy Economics and Policy, Econjournals, Econjournals, vol. 4(3), pages 457-464.
  3. Lee, Chin & Law, Chee-Hong, 2013. "The Effects of Trade Openness on Malaysian Exchange Rate," MPRA Paper 45185, University Library of Munich, Germany.

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