The effect of exchange rate uncertainty on employment in South Africa’s manufacturing sector

Naser Yenus Nuru and Hayelom Yrgaw Gereziher

Journal of Economic and Administrative Sciences, 2021, vol. 39, issue 4, 818-829

Abstract: Purpose - The main purpose of this study is to investigate the symmetric and asymmetric effects of exchange rate uncertainty on employment in South Africa’s manufacturing sector over the period 1985Q1–2019Q2. Design/methodology/approach - Jorda’s (2005) local projection method is employed and following Koopet al.(1996); generalized impulse response functions are generated to see the effect of exchange rate uncertainty on employment in South Africa’s manufacturing sector. Findings - The results show that exchange rate uncertainty affects negatively and significantly employment in South Africa’s manufacturing sector. Employment also responds negatively and significantly to export shock. Inflation and output shocks, however, positively and significantly affect employment on impact. Asymmetric responses of employment to exchange rate uncertainty are also found in this study. While high exchange rate uncertainty leads to a reduction in employment, low exchange rate uncertainty brings an increase in employment in South Africa’s manufacturing sector. Originality/value - This research adds to the scarce empirical literature on the effect of exchange rate uncertainty on employment in South Africa’s manufacturing sector by incorporating mainly non-linearities into the model.

Keywords: Employment; Exchange rate uncertainty; Local projection; Manufacturing sector; South Africa (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jeaspp:jeas-06-2020-0085

DOI: 10.1108/JEAS-06-2020-0085

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