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Testing the Impact of Exchange Rate Uncertainty on Exports in South Africa

Goodness Aye (), Rangan Gupta (), Prudence Moyo () and Nehrunaman Pillay ()
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Goodness Aye: Department of Economics, University of Pretoria
Prudence Moyo: Department of Economics, University of Pretoria
Nehrunaman Pillay: Department of Economics, University of Pretoria

No 201367, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper examines the impact of real effective exchange rate uncertainty on aggregate exports of South Africa for the period 1986Q4-2013Q2. We use a bivariate framework where the structural vector autoregression is modified to accommodate bivariate GARCH-in-Mean errors. We find that exchange rate uncertainty has a significant and negative effect on exports. There is also evidence in our results that accounting for real effective exchange rate uncertainty amplifies the dynamic response of real exports to exchange rate shocks. Furthermore, real exports respond asymmetrically to negative and positive shocks to real effective exchange rate shocks of the same size.

Keywords: Exchange rate volatility; Real Effective Exchange Rate; Exports; Bivariate GARCH-in-Mean VAR (search for similar items in EconPapers)
JEL-codes: C32 E32 F1 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2013-11
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201367

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