The South African Rand-USA Dollar Exchange Rates and the Terms of Trade

Muthucattu Paul and G. R. Motlaleng ()
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G. R. Motlaleng: University of Botswana

Journal of Quantitative Economics, 2006, vol. 4, issue 2, No 11, 130-150

Abstract: Abstract This empirical study for the Republic of South Africa (RSA) indicates that there exists a strong long term relation between the RSA’s nominal rand/dollar exchange rate and the terms of trade. The study employs cointegration and error-correction methods. The error-correction model (ECM) shows that there is a strong causality from the terms of trade to the nominal exchange rate. The causality from the nominal exchange rate to the terms of trade appears to be weak. The pass-through from the nominal exchange rate to import and export prices is reflected at the earliest. There is no evidence for ‘pricing to the market’.

Keywords: Nominal exchange rate; terms of trade; cointegration and error-correction methods; pass-through; purchasing power parity (search for similar items in EconPapers)
JEL-codes: E31 F41 N14 (search for similar items in EconPapers)
Date: 2006
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DOI: 10.1007/BF03546453

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