EconPapers    
Economics at your fingertips  
 

Exchange Rate Volatility, Inflation and Economic Growth in Developing Countries: Panel Data Approach for SADC

Ebenezer Olamide, Kanayo Ogujiuba and Andrew Maredza ()
Additional contact information
Ebenezer Olamide: School of Development Studies, University of Mpumalanga, Nelspruit 1200, South Africa
Kanayo Ogujiuba: School of Development Studies, University of Mpumalanga, Nelspruit 1200, South Africa

Economies, 2022, vol. 10, issue 3, 1-19

Abstract: In the Southern African Development Community, the relationships between exchange rate instability, inflation and economic growth remain at the forefront of economic debate because of the historical antecedent and economic clustering of member countries. Nonetheless, much is not known regarding the complexity, complementarity or substitutability of exchange rate instability and inflation on economic growth for SADC countries. This article examined the influence of exchange rate instability on the inflation–growth nexus of the region for the period of 2000 to 2018. Three major techniques of analyses, Pooled Mean Group (PMG), Generalised Moments (GM) and Dynamic Fixed Effect (DFE), were employed in achieving the goal of the study, but the Pooled Mean Group estimator of the Panel Autoregressive Distributed Lag was favoured by the Hausman test as the main instrument. The GARCH (1, 1) was also employed to generate exchange rate instability. The findings of the study showed that exchange rate instability and inflation have a negative relationship with economic growth of the region. Results further show evidence that economic growth of the region is adversely influenced by the consequential effect of exchange rate instability on inflation: the higher the level of instability in exchange rate, the worse the inflationary-growth relationship of the region. This confirms the menu cost theory of price setting: the higher the rate of inflation, the quicker the exchange rate pass-through effect. It is therefore recommended that policies to ensure appreciation of local currencies should be the priority of member nations.

Keywords: panel data; economic growth; transitional economies; inflation (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
https://www.mdpi.com/2227-7099/10/3/67/pdf (application/pdf)
https://www.mdpi.com/2227-7099/10/3/67/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jecomi:v:10:y:2022:i:3:p:67-:d:773058

Access Statistics for this article

Economies is currently edited by Ms. Hongyan Zhang

More articles in Economies from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().

 
Page updated 2023-12-06
Handle: RePEc:gam:jecomi:v:10:y:2022:i:3:p:67-:d:773058