Exchange rate undervaluation and sectoral performance of the South African economy

Bernard Njindan Iyke

Journal of Economic Studies, 2017, vol. 44, issue 4, 636-649

Abstract: Purpose - The purpose of this paper is to uncover the channels through which real exchange rate undervaluation influences the performance of the South African economy. Design/methodology/approach - The author decomposes the South African economy into three sectors: agriculture, industry, and services. Specifying a model for each sector, the author employs the ordinary least squares (with Newey-West and robust standard errors) and generalized method of moments estimation techniques. The annual time series data cover the period 1962-2014. Findings - The author finds that real exchange rate undervaluation exerted a positive influence on agriculture and industry, and a negative impact on services. Research limitations/implications - The results have practical policy implications, which are discussed in the paper. Originality/value - Although the growth effect of real exchange rate undervaluation has been well established in the literature, the channels through which this occurs has received limited attention. Prior to this study, no study has considered the impact of real exchange rate undervaluation on the economy through the various sectors in the South African context.

Keywords: South Africa; Exchange rate undervaluation; Sectoral performance; C10; F21; F31 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:jespps:jes-03-2016-0052

DOI: 10.1108/JES-03-2016-0052

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