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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

  • Balazs Egert

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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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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