IDEAS home Printed from https://ideas.repec.org/a/ibn/jasjnl/v5y2013i10p227.html
   My bibliography  Save this article

Assessing the Impact of Exchange Rate Volatility on the Competitiveness of South Africa’s Agricultural Exports

Author

Listed:
  • Ajuruchukwu Obi
  • Portia Portia Ndou
  • Bathathu Peter

Abstract

The fluctuations of the exchange rate of the domestic currency have been a major concern. Since the 1970’s there has been a debate on the relationship between exchange rate volatility and export flows. In the wake of the recent global financial crisis and rising food prices, this debate has become even more strident and the concerns even more palpable. South Africa has not escaped the debate. The exchange rate of the South African Rand has been undergoing a series of devaluations for several decades. In such a situation, exporters must contend with some exchange rate volatility which might have implications for export flows. However, in the absence of systematic study, neither the magnitude of the fluctuations nor their impacts is known with certainty and this presents immense policy difficulties. This paper seeks to provide answers to the most commonly asked question as to the magnitude and extent of such fluctuations and their precise impacts on export levels and the market shares of South African citrus exports in the destination markets around the world. The principal objective it to estimate the impact of exchange rate volatility on the competitiveness of South Africa’s agricultural exports. The paper reviews the theoretical literature in respect to foreign exchange market, Balance of Payments, exchange rate models and the evidence from monetarists and the Purchasing Power Parity. Laspeyres-indexed export prices, exchange rates and export volumes for maize, oranges, sugar, apples, grapes, pears, avocados, pineapples, apricots and peaches for the period 1980-2008 and exports to the European Union are modeled by means of ARIMA (AR) and Autoregressive Conditional Heteroscedasticity (ARCH) and export demand equation estimated. The Constant Market Share (CMS) model was applied to assess the extent to which the SA citrus industry has maintained its competitive advantage in several markets. The overall results obtained strongly confirm that exchange rate volatility have a positive impact on the competitiveness of South Africa’s agricultural exports and that, despite the on-going financial crisis that has engulfed the world, South Africa’s citrus exports have maintained a healthy market share. This result is surprising but understandable in the light of the special arrangements put in place by South Africa’s monetary authorities to protect the Rand from over-exposure to global financial developments over the period under review. The important practical implications of these findings for the success of the agricultural restructuring programmes going on in South Africa are evaluated and discussed against the backdrop of the fresh debates on national economic policy management in the wake of financial meltdown that has once again threatened the financial stability of virtually every region in the world in recent years.

Suggested Citation

  • Ajuruchukwu Obi & Portia Portia Ndou & Bathathu Peter, 2013. "Assessing the Impact of Exchange Rate Volatility on the Competitiveness of South Africa’s Agricultural Exports," Journal of Agricultural Science, Canadian Center of Science and Education, vol. 5(10), pages 227-227, September.
  • Handle: RePEc:ibn:jasjnl:v:5:y:2013:i:10:p:227
    as

    Download full text from publisher

    File URL: https://ccsenet.org/journal/index.php/jas/article/download/25796/17956
    Download Restriction: no

    File URL: https://ccsenet.org/journal/index.php/jas/article/view/25796
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    2. Myint Moe Chit & Marian Rizov & Dirk Willenbockel, 2010. "Exchange Rate Volatility and Exports: New Empirical Evidence from the Emerging East Asian Economies," The World Economy, Wiley Blackwell, vol. 33(2), pages 239-263, February.
    3. Milana, Carlo, 1988. "Constant-market-shares analysis and index number theory," European Journal of Political Economy, Elsevier, vol. 4(4), pages 453-478.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bernardin Senadza & Desmond Delali Diaba, 2017. "Effect of exchange rate volatility on trade in Sub-Saharan Africa," Journal of African Trade, Springer, vol. 4(1), pages 20-36, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Goudarzi, Mostafa & Khanarinejad, Komeil & Ardakani, Zahra, . "Investigation the Role of Exchange Rate Volatility on Iran's Agricultural Exports (Case Study: Date, Pistachio and Saffron)," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 4(01), pages 1-7.
    2. Azimi, Mohammad Naim, 2015. "Modelling the Clustering Volatility of India's Wholesales Price Index and the Factors Affecting it," MPRA Paper 70267, University Library of Munich, Germany.
    3. James Temitope Dada, 2020. "Asymmetric effect of exchange rate volatility on trade in sub-Saharan African countries," Journal of Economic and Administrative Sciences, Emerald Group Publishing Limited, vol. 37(2), pages 149-162, July.
    4. Sharma, Chandan & Pal, Debdatta, 2018. "Exchange rate volatility and India's cross-border trade: A pooled mean group and nonlinear cointegration approach," Economic Modelling, Elsevier, vol. 74(C), pages 230-246.
    5. Mourad Zmami & Ousama Ben-Salha, 2015. "Exchange rate movements and manufacturing employment in Tunisia: Do different categories of firms react similarly?," Economic Change and Restructuring, Springer, vol. 48(2), pages 137-167, May.
    6. Yusaku Nishimura & Bianxia Sun, 2018. "China’s Exchange-Rate Regime Reform and Trade Between China and the Eurozone," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(2), pages 450-467, January.
    7. Innocent U Duru & Millicent Adanne Eze & Abubakar Sadiq Saleh & Benedict I Uzoechina & Gabriel O Ebenyi & Ekechi Chukwuka, 2022. "Exchange Rate Volatility and Exports: The Nigerian Scenario," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 12(1), pages 11-28.
    8. Asteriou, Dimitrios & Masatci, Kaan & Pılbeam, Keith, 2016. "Exchange rate volatility and international trade: International evidence from the MINT countries," Economic Modelling, Elsevier, vol. 58(C), pages 133-140.
    9. Rupika Khanna & Chandan Sharma & Abhay Pant, 2022. "COVID-19, firm characteristics and stock volatility: new evidence from the Indian tourism sector," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 19(6), pages 1563-1585, October.
    10. Páll, Zsombor, 2015. "Three essays on the Russian wheat export," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 80, number 80.
    11. Veysel Avsar & Kemal Turkcan, 2013. "Exchange Rate Volatility and U.S. Auto-Industry Exports: A Panel Cointegration Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 3(4), pages 772-787.
    12. Chandan Sharma & Debdatta Pal, 2019. "Does Exchange Rate Volatility Dampen Imports? Commodity-Level Evidence From India," International Economic Journal, Taylor & Francis Journals, vol. 33(4), pages 696-718, October.
    13. Gabriela Mordecki & Ronald Miranda, 2019. "Real Exchange Rate Volatility and Exports: A Study for Four Selected Commodity Exporting Countries," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 66(4), pages 411-437.
    14. Muhammad Aftab & Karim Bux Shah Syed & Rubi Ahmad & Izlin Ismail, 2016. "Exchange-rate variability and industry trade flows between Malaysia and Japan," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(4), pages 453-478, June.
    15. Ronald Miranda & Gabriela Mordecki, 2015. "Real exchange rate volatility impact on exports: A comparative study 1990-2013," Documentos de Trabajo (working papers) 15-18, Instituto de Economía - IECON.
    16. Kafle, Kashi R. & Kennedy, P. Lynn, 2012. "Exchange Rate Volatility and Bilateral Agricultural Trade Flows: The Case of the United States and OECD Countries," 2012 Annual Meeting, February 4-7, 2012, Birmingham, Alabama 119736, Southern Agricultural Economics Association.
    17. Muhammad Aftab & Karim Bux Shah Syed & Naveed Akhter Katper, 2017. "Exchange-rate volatility and Malaysian-Thai bilateral industry trade flows," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 44(1), pages 99-114, January.
    18. Bouoiyour, Jamal & Selmi, Refk, 2014. "How Robust is the Connection between Exchange Rate Uncertainty and Tunisia’s Exports?," MPRA Paper 57505, University Library of Munich, Germany.
    19. Ruslana Rachel Palatnik & Tchai Tavor & Liran Voldman, 2019. "The Symptoms of Illness: Does Israel Suffer from “Dutch Disease”?," Energies, MDPI, vol. 12(14), pages 1-19, July.
    20. Seiler, Volker, 2024. "The relationship between Chinese and FOB prices of rare earth elements – Evidence in the time and frequency domain," The Quarterly Review of Economics and Finance, Elsevier, vol. 95(C), pages 160-179.

    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ibn:jasjnl:v:5:y:2013:i:10:p:227. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Canadian Center of Science and Education (email available below). General contact details of provider: https://edirc.repec.org/data/cepflch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.