Exchange Rate Targeting in South Africa and India

A Parikh

Studies in Economics and Econometrics, 1999, vol. 23, issue 1, 1-20

Abstract: The objective of this paper is to provide an application of a one-sided target zone model to the South African and Indian economies and compare the predictions of the model with the devaluation of the South African rand and Indian rupee in recent times. The South African economy operated dual exchange rate systems: the commercial rand for trade transactions and the financial rand for capital account transactions until March 1995. Using the information on the financial rand for an expected rate of depreciation of the rand against the dollar, our model predicts an exchange rate depreciation which was consistent with the actual depreciation which occurred in mid-1996. For the Indian economy, the model prediction suggests that the 1991 depreciation of the Indian rupee was an over-depreciation.

Date: 1999
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DOI: 10.1080/03796205.1999.12129133

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