THE IMPACT OF REAL EXCHANGE RATE VOLATILITY ON SOUTH AFRICAN EXPORTS TO THE UNITED STATES (U.S.): A BOUNDS TEST APPROACH
THE IMPACT OF REAL EXCHANGE RATE VOLATILITY ON SOUTH AFRICAN EXPORTS TO THE UNITED STATES (U.S.): A BOUNDS TEST APPROACH
Author(s): Lira SEKANTSISubject(s): Business Economy / Management, Economic policy, International relations/trade, Methodology and research technology, Financial Markets
Published by: Editura Universităţii »Alexandru Ioan Cuza« din Iaşi
Keywords: Exchange rate volatility; Autoregressive distributed lag (ARDL); Generalised Autoregressive Conditional Heteroskedasticity (GARCH) Bounds testing; unit root; Error Correction model; Cointegration;
Summary/Abstract: This research paper empirically examines the impact of real exchange rate volatility on trade in the context of South Africa’s exports to the U.S. for the South Africa’s floating period January 1995-February 2007. In measuring real exchange rate volatility, this study utilised GARCH. After establishing the existence of cointegration among the variables involved in our two-country export model, we estimated long-run coefficients by means of ARDL bounds testing procedure proposed by Pesaran, et al.(2001). Our results indicate that real exchange rate volatility exerts a significant and negative impact on South Africa’s exports to the U.S. Therefore, stable and competitive exchange rate and sound macroeconomic fundamentals are required in order to improve international competitiveness and greater penetration of South African exports to international markets.
Journal: Review of Economic and Business Studies (REBS)
- Issue Year: 2011
- Issue No: 8
- Page Range: 119-139
- Page Count: 21
- Language: English
