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Commodity prices and exchange rate volatility: Lessons from South Africa's capital account liberalization

Rabah Arezki (), Elena Ivona Dumitrescu, Andreas Freytag () and Marc Quintyn

Emerging Markets Review, 2014, vol. 19, issue C, 96-105

Abstract: We examine the relationship between the South African Rand and the gold price volatility using monthly data for the period 1979–2010. Our main finding is that prior to capital account liberalization the causality runs from the South African Rand to the gold price volatility but the causality runs the other way around for the post-liberalization period. This finding suggests that gold price volatility plays a key role in explaining both the excessive exchange rate volatility and current disproportionate share of speculative (short-run) inflows that South Africa has been coping with since the opening up of its capital account.

Keywords: Exchange rate; Volatility; Commodities; Financial flows (search for similar items in EconPapers)
JEL-codes: F21 F31 F32 Q0 (search for similar items in EconPapers)
Date: 2014
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Working Paper: Commodity Prices and Exchange Rate Volatility; Lessons from South Africa’s Capital Account Liberalization (2012) Downloads
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DOI: 10.1016/j.ememar.2014.01.001

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