Sources of Nominal Exchange Rate Fluctuations in South Africa

 
Author/Editor: Bhundia, Ashok ; Gottschalk, Jan
 
Publication Date: December 01, 2003
 
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Summary: This paper investigates the sources of fluctuations in the rand-U.S. dollar exchange rate in 2001 and 2002 using an empirical exchange rate model which identifies aggregate supply, aggregate demand, and nominal disturbances as possible sources for exchange rate fluctuations. According to our results, nominal disturbances explain by far most of the rand depreciation in the final quarter of 2001. The fact that the nominal effective exchange rate also depreciated sharply suggests the nominal disturbances were domestically generated. From a preliminary examination of the relative movements in policy interest rates in South Africa and the United States, along with growth rates in both narrow and broad monetary aggregates in South Africa, it is difficult to isolate the underlying cause of the nominal disturbances in 2001 and 2002. Clearly, the task remains a challenging one with the empirical tools available.
 
Series: Working Paper No. 03/252
Subject(s): Exchange rates | South Africa | Economic models

Author's Keyword(s): Nominal exchange rate | real disturbances | nominal disturbances | structural VAR
 
English
Publication Date: December 01, 2003
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA2522003 Pages: 24
Price:
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