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Is the rand at fair value?

Author

Listed:
  • Guest, Oliver
  • Steenkamp, Daan

Abstract

This paper assesses whether the rand has been misaligned relative to its economic fundamentals compared to the dollar. Using a Bayesian regime‐switching Vector Error Correction model that allows for the drivers of exchange rate movements to change over time, we show that the historical dynamics of the value of the rand can be explained by a small number of macroeconomic fundamentals.

Suggested Citation

  • Guest, Oliver & Steenkamp, Daan, 2026. "Is the rand at fair value?," EconStor Research Reports 336005, ZBW - Leibniz Information Centre for Economics.
    • Handle: RePEc:zbw:esrepo:336005
    as

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    File URL: https://www.econstor.eu/bitstream/10419/336005/1/Codera_Is_the_ZAR_at_fair_value.pdf
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    References listed on IDEAS

    as
    1. Matthew Greenwood-Nimmo & Daan Steenkamp & Rossouw van Jaarsveld, 2022. "CaninformationonthedistributionofZARreturnsbeusedtoimproveSARBsZARforecasts," Working Papers 11035, South African Reserve Bank.
    2. Huber, Florian & Zörner, Thomas O., 2019. "Threshold cointegration in international exchange rates:A Bayesian approach," International Journal of Forecasting, Elsevier, vol. 35(2), pages 458-473.
    3. Olds, Tim & Steenkamp, Daan & Van Jaarsveld, Rossouw, 2021. "The impact of global FX liquidity on the rand," MPRA Paper 116466, University Library of Munich, Germany.
    4. Luchelle Soobyah & Daan Steenkamp, 2019. "The role of the rand as a shock absorber," Working Papers 9254, South African Reserve Bank.
    5. Daan Steenkamp, 2019. "Rand misalignment Evidence from Bayesian Threshold VECMs," Occasional Bulletin of Economic Notes 9342, South African Reserve Bank.
    6. Byron Botha & Koketso Mano & Franz Ruch, 2019. "A Stylised Semi structural Model of the Equilibrium REER," Occasional Bulletin of Economic Notes 9341, South African Reserve Bank.
    7. Byron Botha & Tim Olds & Geordie Reid & Daan Steenkamp & Rossouw van Jaarsveld, 2021. "Nowcasting South African gross domestic product using a suite of statistical models," South African Journal of Economics, Economic Society of South Africa, vol. 89(4), pages 526-554, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

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    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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