Sources of Nominal Exchange Rate Fluctuations in South Africa

December 1, 2003

Preview Citation

Format: Chicago

Jan Gottschalk, and Ashok Bhundia. Sources of Nominal Exchange Rate Fluctuations in South Africa, (USA: International Monetary Fund, 2003) accessed September 18, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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.

Subject: Depreciation, Exchange rate adjustments, Exchange rates, Foreign exchange, National accounts, Nominal effective exchange rate, Real exchange rates

Keywords: Africa, Depreciation, Depreciation episode, Exchange rate, Exchange rate adjustments, Exchange rate fluctuation, Exchange rates, Global, Monetary policy stance, Nominal disturbances, Nominal effective exchange rate, Nominal exchange rate, Nominal exchange rate response, Rand, Rand depreciation, Reaction function, Real disturbances, Real exchange rates, Structural VAR, WP

Publication Details

Pages:

25
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2003/252
Stock No:

WPIEA2522003
ISBN:

9781451875935
ISSN:

1018-5941

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