Exchange rate undervaluation and sectoral performance of the South African economy

Iyke, Bernard Njindan

doi:10.1108/jes-03-2016-0052

Cited by 7 publications

(10 citation statements)

References 45 publications

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“…The larger effect of undervaluation in alternative estimators could represent an upward bias mentioned by Rodrik (2008) that results from omitted time-variant variables that may affect both RER undervaluation and growth. Notwithstanding this upward bias, the size of the coefficient is consistent with the 0.181-0.209 range reported in Njindan (2017). Since our sample consists of both tradable goods and service sectors, one can make the argument that undervaluation in South Africa has created an environment that is conducive to sectoral growth.…”

Section: Resultssupporting

confidence: 79%

“…From a panel data set covering 39 countries and 22 manufacturing sectors (two-digit) for the period 1995-2008, they confirm a positive and significant impact of undervaluation on the manufacturing sector. A similar result is confirmed in a recent study by Njindan (2017) for particular sectors, who empirically tests the impact of a real undervaluation on South Africa's agriculture, industry and services sectors. Results from ordinary least squares and generalised method of moments techniques based on annual time series data for the period 1962-2014 show that RER undervaluation correlates positively and significantly with agriculture and industry but correlates negatively with services.…”

supporting

confidence: 78%

“…Failure to capture such heterogeneity of sectoral responses, in turn, surfaces the problem of aggregation bias and consequently, the inferences drawn from such analyses may be misleading. Second, the few available sector-specific studies (Njindan, 2017;Masunda, 2011;Berka et al, 2014;Bhorat et al, 2014;Brixiová and Ncube, 2014) in exception of Vaz and Baer (2014) rarely adequately address endogeneity of the real exchange rate (RER). Third, most of the sectoral studies have mainly focussed on the contemporaneous effect of exchange rate undervaluation on sectoral growth: an approach which does not accommodate the delayed effects of undervaluation.…”

Section: Introductionmentioning

confidence: 99%

“…The sectors considered are agriculture, mining, manufacturing, tourism, financial and the personal services sector for the period spanning 1985 through 2014. Previous studies on exchange rate undervaluation in the context of South Africa are Bhorat et al (2014), Zwedala (2013), Elbadawi et al (2012), Sibanda et al (2013), Mpofu (2013), Ngandu (2008) and Njindan (2017). Our study differs in that it uses a system GMM estimator and a dynamic panel data approach at a sectoral level with a sample that consists of both goods and service sectors.…”

Section: Introductionmentioning

confidence: 99%

“…While Njindan (2017) documents a positive impact of undervaluation on agriculture and industry, Masunda (2011) reports a negative and significant impact of undervaluation on Zimbabwe's agriculture, manufacturing and mining sectors using the feasible generalised least squares approach in the context of Zimbabwe for the period spanning 1980-2003. Brixiová and Ncube (2014) in the context of Zimbabwe focussing on three sectors agriculture, mining and manufacturing conclude that overvalued exchange rates have contributed to economic collapse of sectoral growth in Zimbabwe but they do not find a robust positive link between undervaluation and sectoral growth.…”

mentioning

confidence: 99%

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Real exchange rate undervaluation and sectoral growth in South Africa

Mazorodze

Tewari

2018

AJEMS

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Purpose The purpose of this paper is to establish the empirical link between real exchange rate (RER) undervaluation and sectoral growth in South Africa between 1984 and 2014. Design/methodology/approach The study employs a dynamic panel data approach estimated by the system generalised method of moments technique in a bid to control for endogeneity. Findings The authors find a significant positive impact of undervaluation on sectoral growth which increases with capital accumulation. Also, the authors confirm that undervaluation promotes sectoral growth up to a point where further increases in undervaluation retards growth. Practical implications The results confirm the importance of policies that keep the domestic currency weaker to foster sectoral growth. Originality/value The originality of this paper lies in establishing the impact of exchange rate undervaluation on growth at a sector level in the context of South Africa using a dynamic panel data approach.

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Section: Resultssupporting

confidence: 79%

supporting

confidence: 78%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

mentioning

confidence: 99%

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Real exchange rate undervaluation and sectoral growth in South Africa

Mazorodze

Tewari

2018

AJEMS

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Nonlinear effects of exchange rate changes on the South African bilateral trade balance

Iyke

2017

The Journal of International Trade & Economic Development

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In testing for the J-curve, previous studies have shown that the trade balance model is better fitted using cointegration and error correction mechanisms. These mechanisms are able to incorporate the short-term deterioration and the long-term improvement of the trade balancethe definition of the J-curve. However, the drawback of the established cointegration and error correction frameworks is that they assume symmetry in the equilibrium adjustment process. Incidentally, studies which have used the linear frameworks have found little support for the Jcurve. Since the adjustment process could be nonlinear, a fresh investigation of the J-curve using nonlinear approaches could provide competing evidence. This paper retested the J-curve by using quarterly data for South Africa and her key trade partners (China, Germany, India, Japan, the UK and the US) and found the linear specification to support the J-curve phenomenon in only two cases (India and the US) under relaxed conditions. In contrast, the nonlinear specification supported the J-curve phenomenon in all cases at no cost of serial correlation and functional misspecification. We also found the real exchange rate changes to have significant nonlinear effects on the South African trade balance.

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A Comparative Analysis of Currency Volatility among BRICS Countries

Zerihun

Breitenbach

Iyke

2019

Journal of African Business

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In recent years, exchange rates of the BRICS countries have all experienced periods of high volatility. Thus far, no study has simultaneously compared the volatility of the BRICS currencies and analyzed the dependence and causal structure of relative volatility of these peer currencies. We addressed this issue by using monthly data from January 1995 to January 2017. We find that:(i) Brazil, India and China are more competitive than South Africa, on average, while South Africa, in turn, is only more competitive than Russia;(ii) the rand has been more volatile than the Brazilian real and the Russian ruble, but less volatile than the Chinese renminbi and the Indian rupee; (iii) there are inter-currency volatility correlations among the real, renminbi, ruble, and rand;(iv) the renminbi return volatility causes return volatility in the real, ruble, and rand.

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Exchange rate undervaluation and sectoral performance of the South African economy

Abstract: The

Cited by 7 publications

References 45 publications

Real exchange rate undervaluation and sectoral growth in South Africa

Real exchange rate undervaluation and sectoral growth in South Africa

Nonlinear effects of exchange rate changes on the South African bilateral trade balance

A Comparative Analysis of Currency Volatility among BRICS Countries

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