The Exchange Rate, Dutch Disease and Manufacturing in South Africa: What do the Data Say?
AbstractThe Dutch disease argument suggests that in commodity exporting countries "overvaluation" of the currency due to increases in commodity prices harms manufacturing even though the economy as a whole benefits, led by the booming natural resources sector. The relationship between the real exchange rate and manufacturing is studied here with regard to South Africa as a minerals-rich export-led economy. Since manufacturing is co-determined within a system of inter-related variables, a Johansen VAR/VEC cointegration approach was used to estimate these relationships. Using quarterly data for the sample period 1980â€”2010, the main findings are: world growth is the single most important determinant of domestic manufacturing; while the real exchange rate has the predicted negative sign, there is no evidence of a Dutch disease specific effect on manufacturing; large increases in unit labour costs since the early 1980s have dragged down manufacturing in South Africa over the sample period.
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Bibliographic InfoPaper provided by Economic Research Southern Africa in its series Working Papers with number 281.
Length: 25 pages
Date of creation: 2012
Date of revision:
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Find related papers by JEL classification:
- E20 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- O55 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Africa
This paper has been announced in the following NEP Reports:
- NEP-AFR-2012-05-22 (Africa)
- NEP-ALL-2012-05-22 (All new papers)
- NEP-OPM-2012-05-22 (Open Economy Macroeconomic)
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.:
- Wheeler, David, 1984. "Sources of stagnation in sub-Saharan Africa," World Development, Elsevier, vol. 12(1), pages 1-23, January.
- Corden, W M, 1984. "Booming Sector and Dutch Disease Economics: Survey and Consolidation," Oxford Economic Papers, Oxford University Press, vol. 36(3), pages 359-80, November.
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- Davis, Graham A., 1995. "Learning to love the Dutch disease: Evidence from the mineral economies," World Development, Elsevier, vol. 23(10), pages 1765-1779, October.
- van Wijnbergen, Sweder J G, 1984. "The 'Dutch Disease': A Disease after All?," Economic Journal, Royal Economic Society, vol. 94(373), pages 41-55, March.
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