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Estimation of the trade elasticities for the South African economy

Author

Listed:
  • Reuben Jerome Kisten

    (University of KwaZulu-Natal)

  • Ntokozo Hadebe

    (University of KwaZulu-Natal)

  • Simiso Msomi

    (University of KwaZulu-Natal)

  • Malibongwe Nyathi

    (Tshwane University of Technology)

Abstract

The Marshall-Lerner condition states that a trade balance improves after currency depreciation if trade elasticities exceed one. Using the Vector Error Correction Method (VECM), this study tests the condition for South Africa, focusing on how exchange rate changes affect the trade balance under a floating exchange rate regime. The analysis examines short- and long-run impacts on exports and imports to assess whether exchange rate adjustments can improve the trade balance. Findings reveal that global income growth and exchange rate appreciation positively influence exports, while imports increase with both appreciation and higher domestic income. Although exports and imports respond strongly to exchange rate changes, the Marshall-Lerner condition does not hold for South Africa, suggesting that exchange rate adjustments alone may not improve the trade balance. Key Words:Marshall-Lerner Condition, Vector Error Correction Model, Exchange Rates, Trade Balance

Suggested Citation

  • Reuben Jerome Kisten & Ntokozo Hadebe & Simiso Msomi & Malibongwe Nyathi, 2026. "Estimation of the trade elasticities for the South African economy," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 15(1), pages 89-100, January.
    • Handle: RePEc:rbs:ijbrss:v:15:y:2026:i:1:p:89-100
    DOI: 10.20525/ijrbs.v14i8.4518
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    References listed on IDEAS

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