The Impact of AIDS-Related News on Exchange Rates in South Africa

Kyle Kauffman and Akila Weerapana

Economic Development and Cultural Change, 2006, vol. 54, issue 2, pages 349-68

Abstract: This article focuses on the economic impact of AIDS-related news on exchange rates in South Africa. South Africa's HIV/AIDS infection rates are so high that AIDS is now a macroeconomic problem, not just a public health problem. News about the spread of the disease can therefore have significant effects on financial markets. We collect daily data on the number of news stories about AIDS that appear in the Cape Times from 1998 to 2002 and examine the impact of these news stories on fluctuations in the South African rand-U.S. dollar exchange rate. We find that negative news stories about AIDS have a significant negative effect on the value of the rand but that positive news stories have little or no effect. The findings of the article provide concrete evidence of a channel through which the AIDS pandemic continues to adversely affect macroeconomic conditions in sub-Saharan African countries.

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