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The effect of real exchange rate volatility on income distribution in South Africa

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  • Goodness C. Aye
  • Laurence Harris

Abstract

This study investigates the effect of real exchange rate volatility on the distribution of income between labour and capital in South Africa. Both symmetric and asymmetric effects are considered. Using quarterly data for 1985:1-2018:3 and local linear projection, we find that the immediate response of labour's income share to a one standard deviation shock in exchange rate volatility is negative. Moreover, high exchange rate volatility impacts negatively on labour's income share, while low exchange rate volatility impacts positively on labour income.

Suggested Citation

  • Goodness C. Aye & Laurence Harris, 2019. "The effect of real exchange rate volatility on income distribution in South Africa," WIDER Working Paper Series wp-2019-29, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2019-29
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