The Impact of Exchange Rate Volatility on South African Exports

Abstract

Exchange rates have been highly volatile in South Africa especially after the end of the Bretton Woods system and this has raised a lot of debate amongst interested parties in South Africa such as the South African government and the Congress of South African Trade Union. Therefore, this paper investigates the impact of exchange rate volatility on aggregate South African exports flows to the rest of the world for the period 2000 to 2009. The results obtained suggest that, there exist no statistically significant relationship that is there is an ambiguous relationship between South African exports flows and exchange rate volatility. Although the results were not robust, at the same the study found some sensitivity of South African exports to movements of the exchange rate. We find that, depending on the measure of volatility used, exchange rate volatility either does not have a significant impact on South Africa's exports flows, or it has a positive impact on aggregate goods and services.

The Impact of Exchange Rate Uncertainty on Exports in South Africa

“…The negative impact of real effective exchange rate volatility on exports in South Africa indicates that firms in South Africa may be risk averse in line with the theoretical exposition of Clark (1973) which assumes that variability of the exchange rate is a measure of the risk to the trading firms and also consistent with some of the South African studies (Sekantsi, 2011;Nyahokwe and Ncwadi, 2013). An increase in exchange rate volatility would raise the cost for risk-averse traders.…”

“…However at a disaggregated level, the results are ambiguous with some sectors being positively and significantly affected by exchange rate uncertainty while others are affected positively and significantly. Nyahokwe and Ncwadi (2013) used monthly data for the period 2000-2010 to examine the impact of exchange rate volatility on aggregate South African exports. Using the Johansen cointegration technique and VECM estimation, they found that the exchange rate has an ambiguous (positive effect in the first month and negative effect in the second month) but insignificant effect on exports, yet they propose a Tobin tax as a policy measure on foreign exchange transactions to reduce exchange rate volatility.…”

Exchange rate volatility and manufacturing commodity exports in ASEAN-5: A symmetric and asymmetric approach

“…In another study by [ 29 ], findings show that the volatility of the exchange rate negatively affects South Africa's export and import to and from the European Union over the period 1980–2009. A contrary finding by [ 30 ] reports that the volatility of the exchange rate asserts no significant impact on South Africa's aggregate export [ 31 ]. used GARCH and ARDL modelling approaches and scrutinizes the influence of exchange rate volatility on Nigeria's crude oil export to Brazil, Canada, France, Italy, Spain, the USA, and the UK from January 2006 to December 2019.…”

Impact of Exchange Rate Volatility on The Performance of Egyptian Agricultural Exports Using A Vector Error Correction Model أثر تقلبات سعر الصرف على أداء الصادرات الزراعیة المصریة باستخدام نموذج متجه تصحیح الخطأ

“…In this respect, Nazlioglu and Erdem (2010), Nyahokwe and Ncwadi (2013), and Irandoust et al(2006) point out to two potential explanations. First, demand side factors may lead to inelastic foreign demand curve and thus eliminate the effect of change rate movements on export performance.…”