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Testing the Impact of Exchange Rate Uncertainty on Exports in South Africa

Author

Listed:
  • Goodness C. Aye

    (Department of Economics, University of Pretoria)

  • Rangan Gupta

    (Department of Economics, University of Pretoria)

  • Prudence S. Moyo

    (Department of Economics, University of Pretoria)

  • Nehrunaman Pillay

    (Department of Economics, University of Pretoria)

Abstract

This paper examines the impact of real effective exchange rate uncertainty on aggregate exports of South Africa for the period 1986Q4-2013Q2. We use a bivariate framework where the structural vector autoregression is modified to accommodate bivariate GARCH-in-Mean errors. We find that exchange rate uncertainty has a significant and negative effect on exports. There is also evidence in our results that accounting for real effective exchange rate uncertainty amplifies the dynamic response of real exports to exchange rate shocks. Furthermore, real exports respond asymmetrically to negative and positive shocks to real effective exchange rate shocks of the same size.

Suggested Citation

  • Goodness C. Aye & Rangan Gupta & Prudence S. Moyo & Nehrunaman Pillay, 2013. "Testing the Impact of Exchange Rate Uncertainty on Exports in South Africa," Working Papers 201367, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201367
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    More about this item

    Keywords

    Exchange rate volatility; Real Effective Exchange Rate; Exports; Bivariate GARCH-in-Mean VAR;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F1 - International Economics - - Trade

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