The fundamental determinants of the South African real exchange rate from 1995 to 2014

 

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dc.contributor.advisor Biekpe, Nicholas en_ZA
dc.contributor.author Majaya, Thomas Bongani en_ZA
dc.date.accessioned 2017-09-23T06:21:45Z
dc.date.available 2017-09-23T06:21:45Z
dc.date.issued 2017 en_ZA
dc.identifier.citation Majaya, T. 2017. The fundamental determinants of the South African real exchange rate from 1995 to 2014. University of Cape Town. en_ZA
dc.identifier.uri http://hdl.handle.net/11427/25332
dc.description.abstract In a connected world, the foreign exchange rate for any country ensures that exports are competitive, imports are affordable, and there exists an economic environment conducive for sustainable growth of the economy. South Africa as an emerging country is no exception. Many stakeholders including, the South African Reserve Bank (SARB) as the monetary authority of the country are interested in understanding the key factors that influence the South African exchange rate and how these factors may be managed effectively to ensure sustainable economic growth for the South African economy. This research studies the fundamental determinants of the real exchange rate (RER) for South Africa under a market driven floating exchange rate arrangement from March 1995 to December 2014. The research investigates the effects of the fundamental determinants of the RER on the South African rand using Johansen's method and a Vector Error Correction Model (VECM). The results of the research show that five fundamental variables drove the RER for the 20 years from 1995 to 2014 mainly commodity prices, interest rate differential, net foreign assets, terms of trade, openness and productivity. The most significant of these determinants were commodity prices, openness and productivity. The interaction of commodity prices and the RER point to the fact that South Africa does not suffer from the Dutch Disease. The research also supports the Balassa-Samuelson effect where an increase in productivity causes RER appreciation. In terms of policy, the research recommends that South Africa should continue to strengthen the manufacturing export led strategy as well as diversifying the economy. This entails growing the manufacturing sector, diversifying the export markets to reduce reliance on China and the Euro Zone. South Africa should continue with the inflation targeting policy of the SARB, implemented through the interest rate instrument, which only affects the domestic economy and has no major effect on the RER. en_ZA
dc.language.iso eng en_ZA
dc.subject.other Development Finance en_ZA
dc.title The fundamental determinants of the South African real exchange rate from 1995 to 2014 en_ZA
dc.type Master Thesis
uct.type.publication Research en_ZA
uct.type.resource Thesis en_ZA
dc.publisher.institution University of Cape Town
dc.publisher.faculty Faculty of Commerce en_ZA
dc.publisher.department Research of GSB en_ZA
dc.type.qualificationlevel Masters
dc.type.qualificationname MCom en_ZA
uct.type.filetype Text
uct.type.filetype Image
dc.identifier.apacitation Majaya, T. B. (2017). <i>The fundamental determinants of the South African real exchange rate from 1995 to 2014</i>. (Thesis). University of Cape Town ,Faculty of Commerce ,Research of GSB. Retrieved from http://hdl.handle.net/11427/25332 en_ZA
dc.identifier.chicagocitation Majaya, Thomas Bongani. <i>"The fundamental determinants of the South African real exchange rate from 1995 to 2014."</i> Thesis., University of Cape Town ,Faculty of Commerce ,Research of GSB, 2017. http://hdl.handle.net/11427/25332 en_ZA
dc.identifier.vancouvercitation Majaya TB. The fundamental determinants of the South African real exchange rate from 1995 to 2014. [Thesis]. University of Cape Town ,Faculty of Commerce ,Research of GSB, 2017 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/25332 en_ZA
dc.identifier.ris TY - Thesis / Dissertation AU - Majaya, Thomas Bongani AB - In a connected world, the foreign exchange rate for any country ensures that exports are competitive, imports are affordable, and there exists an economic environment conducive for sustainable growth of the economy. South Africa as an emerging country is no exception. Many stakeholders including, the South African Reserve Bank (SARB) as the monetary authority of the country are interested in understanding the key factors that influence the South African exchange rate and how these factors may be managed effectively to ensure sustainable economic growth for the South African economy. This research studies the fundamental determinants of the real exchange rate (RER) for South Africa under a market driven floating exchange rate arrangement from March 1995 to December 2014. The research investigates the effects of the fundamental determinants of the RER on the South African rand using Johansen's method and a Vector Error Correction Model (VECM). The results of the research show that five fundamental variables drove the RER for the 20 years from 1995 to 2014 mainly commodity prices, interest rate differential, net foreign assets, terms of trade, openness and productivity. The most significant of these determinants were commodity prices, openness and productivity. The interaction of commodity prices and the RER point to the fact that South Africa does not suffer from the Dutch Disease. The research also supports the Balassa-Samuelson effect where an increase in productivity causes RER appreciation. In terms of policy, the research recommends that South Africa should continue to strengthen the manufacturing export led strategy as well as diversifying the economy. This entails growing the manufacturing sector, diversifying the export markets to reduce reliance on China and the Euro Zone. South Africa should continue with the inflation targeting policy of the SARB, implemented through the interest rate instrument, which only affects the domestic economy and has no major effect on the RER. DA - 2017 DB - OpenUCT DP - University of Cape Town LK - https://open.uct.ac.za PB - University of Cape Town PY - 2017 T1 - The fundamental determinants of the South African real exchange rate from 1995 to 2014 TI - The fundamental determinants of the South African real exchange rate from 1995 to 2014 UR - http://hdl.handle.net/11427/25332 ER - en_ZA


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