On the Rand: Determinants of the South African Exchange Rate
AbstractThis paper is an econometric investigation of the determinants of the real value of the South African rand over the period 1984-2006. The results show a relatively good fit. As always with exchange rate equations, there is substantial weight on the lagged exchange rate, which can be attributed to a momentum component. Nevertheless, economic fundamentals are significant and important. This is especially true of an index of the real prices of South African mineral commodities, which even drives out real income as a significant determinant. An implication is that the 2003-2006 real appreciation of the rand can be attributed to the Dutch Disease. In other respects, the rand behaves like currencies of industrialized countries with well-developed financial markets. In particular, high South African interest rates raise international demand for the rand and lead to real appreciation, once one also controls for a forward-looking measure of expected inflation and a measure of default risk or country risk. It is in the latter respects, in particular, that the paper purports to improve on earlier studies of the rand. [Jointly published as Center for International Development Working Paper No. 139 and KSG Faculty Research Working Paper Series RWP07-015.]
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Harvard University, John F. Kennedy School of Government in its series Working Paper Series with number rwp07-015.
Date of creation: Mar 2007
Date of revision:
Contact details of provider:
Postal: 79 JFK Street, Cambridge, MA 02138
Web page: http://www.ksg.harvard.edu/research/working_papers/index.htm
More information through EDIRC
Other versions of this item:
- Jeffrey Frankel, 2007. "On The Rand: Determinants Of The South African Exchange Rate," South African Journal of Economics, Economic Society of South Africa, vol. 75(3), pages 425-441, 09.
- Jeffrey Frankel, 2007. "On the Rand: Determinants of the South African Exchange Rate," NBER Working Papers 13050, National Bureau of Economic Research, Inc.
- F31 - International Economics - - International Finance - - - Foreign Exchange
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Janine Aron & Ibrahim Elbadawi & Brian Kahn, 1998.
"Determinants of the real exchange rate in South Africa,"
CSAE Working Paper Series
1997-16, Centre for the Study of African Economies, University of Oxford.
- Janine Aron & Ibrahim Elbadawi and Brian Kahn, 1997. "Determinants of the real exchange rate in South Africa," Economics Series Working Papers WPS/1997-16, University of Oxford, Department of Economics.
- Ang, Andrew & Bekaert, Geert & Wei, Min, 2007.
"Do macro variables, asset markets, or surveys forecast inflation better?,"
Journal of Monetary Economics,
Elsevier, vol. 54(4), pages 1163-1212, May.
- Andrew Ang & Geert Bekaert & Min Wei, 2005. "Do Macro Variables, Asset Markets or Surveys Forecast Inflation Better?," NBER Working Papers 11538, National Bureau of Economic Research, Inc.
- Andrew Ang & Geert Bekaert & Min Wei, 2006. "Do macro variables, asset markets, or surveys forecast inflation better?," Finance and Economics Discussion Series 2006-15, Board of Governors of the Federal Reserve System (U.S.).
- Guido Lorenzoni & Ricardo J. Caballero, 2007.
"Persistent Appreciations and Overshooting: A Normative Analysis,"
2007 Meeting Papers
196, Society for Economic Dynamics.
- Ricardo J. Caballero & Guido Lorenzoni, 2007. "Persistent Appreciations and Overshooting: A Normative Analysis," NBER Working Papers 13077, National Bureau of Economic Research, Inc.
- Michael B. Devereux & Charles Engel, 2007.
"Expectations and Exchange Rate Policy,"
062007, Hong Kong Institute for Monetary Research.
- Mark, Nelson C, 1995. "Exchange Rates and Fundamentals: Evidence on Long-Horizon Predictability," American Economic Review, American Economic Association, vol. 85(1), pages 201-18, March.
- Frankel, Jeffrey A & Froot, Kenneth A, 1987.
"Using Survey Data to Test Standard Propositions Regarding Exchange Rate Expectations,"
American Economic Review,
American Economic Association, vol. 77(1), pages 133-53, March.
- Frankel, Jeff & Froot, Ken, 1986. "Using Survey Data to Test Standard Propositions Regarding Exchange Rate Expectations," Department of Economics, Working Paper Series qt1972q8wm, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Ronald MacDonald & Luca Antonio Ricci, 2003.
"Estimation of the Equilibrium Real Exchange Rate for South Africa,"
IMF Working Papers
03/44, International Monetary Fund.
- Ronald Macdonald & Luca Antonio Ricci, 2004. "Estimation Of The Equilibrium Real Exchange Rate For South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 72(2), pages 282-304, 06.
- Stokke, Hildegunn E., 2008.
"Resource boom, productivity growth and real exchange rate dynamics -- A dynamic general equilibrium analysis of South Africa,"
Elsevier, vol. 25(1), pages 148-160, January.
- Hildegunn Ekroll Stokke, 2006. "Resource Boom, Productivity Growth and Real Exchange Rate Dynamics - A dynamic general equilibrium analysis of South Africa," Working Paper Series 7206, Department of Economics, Norwegian University of Science and Technology.
- Goodhart, Charles, 1988. "The Foreign Exchange Market: A Random Walk with a Dragging Anchor," Economica, London School of Economics and Political Science, vol. 55(220), pages 437-60, November.
- Jeffrey A. Frankel & Kenneth A. Froot, 1987. "Using Survey Data to Test Some Standard Propositions Regarding Exchange Rate Expectations," NBER Working Papers 1672, National Bureau of Economic Research, Inc.
- Janine Aron & Ibrahim Elbadawi, 1999. "Reflections on the South African rand crisis of 1996 and its consequences," CSAE Working Paper Series 1999-13, Centre for the Study of African Economies, University of Oxford.
- Elena Dumitrescu & Rabah Arezki & Andreas Freytag & Marc Quintyn, 2012. "Commodity Prices and Exchange Rate Volatility: Lessons from South Africaâ€™s Capital Account Liberalization," IMF Working Papers 12/168, International Monetary Fund.
- Sean J. Gossel & Nicholas Biekpe, 2012. "The nominal rand/dollar exchange rate: before and after 1995," Studies in Economics and Finance, Emerald Group Publishing, vol. 29(2), pages 105-117, June.
- McKenzie, Rex & Pons-Vignon, Nicolas, 2012. "Volatile Capital Flows and a Route to Financial Crisis in South Africa," MPRA Paper 40119, University Library of Munich, Germany.
- Balázs Égert, 2012.
"Nominal and Real Exchange Rate Models in South Africa: How Robust Are They?,"
EconomiX Working Papers
2012-18, University of Paris West - Nanterre la Défense, EconomiX.
- Balazs Egert, 2012. "Nominal and Real Exchange Rate Models in South Africa: How Robust are they?," CESifo Working Paper Series 3853, CESifo Group Munich.
- Martin Grandes & Marcel Peter & Nicolas Pinaud, 2010. "Pricing the Currency Premium Under Flexible Exchange Rates: Evidence from South Africa," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(60), pages 7-52, October -.
- Frankel, Jeffrey A., 2012. "The Natural Resource Curse: A Survey of Diagnoses and Some Prescriptions," Working Paper Series rwp12-014, Harvard University, John F. Kennedy School of Government.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.