Does South Africa Suffer from the â€˜Fear of Floatâ€™ Syndrome? An Analysis of the Efficacy and Challenges of a Managed Floating Exchange Rate Regime with Financial Integration
The paper examines whether South Africa suffers from a â€˜fear of floatâ€™ syndrome. The analysis also covers the efficacy and challenges of a managed floating exchange rate regime. I use time series data, volatility equations and ARCH models to test the volatility of South Africaâ€™s exchange rate, interest rate and foreign exchange reserves. Evidence shows that South Africa has volatile interest and exchange rates, but not foreign exchange reserves. Yet, South Africa does not seem to suffer from an extreme and chronic form of â€˜fear of floatingâ€™. South Africa requires financial integration to finance its current account deficits and to complement its low savings rate. Yet, evidence indicates that both capital account openness and foreign exchange control liberalization have no robust impact on growth. The authoritiesâ€™ intervention in the 2001 currency crisis did not help. Hence, I recommend that South Africa should use interest rates early to target both inflation and foreign exchange rates. Challenges remain in the form of relatively high interest rates, volatile capital flows, perceptions, destabilizing speculation, and loopholes in foreign exchange controls.
|Date of creation:||Aug 2004|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.soas.ac.uk/economics/
More information through EDIRC
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.:
- Michael D. Bordo & Marc Flandreau, 2001.
"Core, Periphery, Exchange Rate Regimes, and Globalization,"
Sciences Po publications
n°3077, Sciences Po.
- Michael D. Bordo & Marc Flandreau, 2003. "Core, Periphery, Exchange Rate Regimes, and Globalization," NBER Chapters, in: Globalization in Historical Perspective, pages 417-472 National Bureau of Economic Research, Inc.
- Bordo, Michael D & Flandreau, Marc, 2001. "Core, Periphery, Exchange Rate Regimes and Globalization," CEPR Discussion Papers 3077, C.E.P.R. Discussion Papers.
- Michael D. Bordo & Marc Flandreau, 2001. "Core, Periphery, Exchange Rate Regimes, and Globalization," NBER Working Papers 8584, National Bureau of Economic Research, Inc.
- Ricardo Hausmann & Ugo Panizza & Ernesto H. Stein, 2000.
"Why Do Countries Float the Way They Float?,"
Research Department Publications
4205, Inter-American Development Bank, Research Department.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2004.
"The Modern History of Exchange Rate Arrangements: A Reinterpretation,"
The Quarterly Journal of Economics,
MIT Press, vol. 119(1), pages 1-48, February.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2002. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," NBER Working Papers 8963, National Bureau of Economic Research, Inc.
- Reinhart, Carmen & Rogoff, Kenneth, 2004. "The modern history of exchange rate arrangements: A reinterpretation," MPRA Paper 14070, University Library of Munich, Germany.
- Frankel, Jeffrey A. & Fajnzylber, Eduardo & Schmukler, Sergio L. & Serven, Luis, 2001.
"Verifying exchange rate regimes,"
Journal of Development Economics,
Elsevier, vol. 66(2), pages 351-386, December.
- Taylor, Lance, 1994. "Gap models," Journal of Development Economics, Elsevier, vol. 45(1), pages 17-34, October.
- Dani Rodrik & Andres Velasco, 1999. "Short-Term Capital Flows," NBER Working Papers 7364, National Bureau of Economic Research, Inc.
- Sebastian Edwards & Miguel A. Savastano, 1999. "Exchange Rates in Emerging Economies: What Do We Know? What Do We Need to Know?," NBER Working Papers 7228, National Bureau of Economic Research, Inc.
- Machiko Nissanke & Howard Stein, 2003. "Financial Globalization and Economic Development: Toward an Institutional Foundation," Eastern Economic Journal, Eastern Economic Association, vol. 29(2), pages 287-308, Spring.
- Jeffrey A. Frankel, 1999. "No Single Currency Regime is Right for All Countries or At All Times," NBER Working Papers 7338, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:soa:wpaper:138. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Duo QIN)The email address of this maintainer does not seem to be valid anymore. Please ask Duo QIN to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.