Estimation of the Equilibrium Real Exchange Rate for South Africa
IMF Working Papers, March 1, 2003
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- Estimation of the Equilibrium Real Exchange Rate for South Africa
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Bibliographic details
- Authors: Ronald MacDonald, Luca A Ricci
- Published: March 1, 2003
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451846430.001
Methodology
- Based on the Johansen cointegration estimation methodology.
- Explains long-run behavior of the real effective exchange rate using a set of fundamentals.
Key findings
- Much of the long-run behavior of the real effective exchange rate of South Africa can be explained by:
- real interest rate differentials,
- GDP per capita (both relative to trading partners),
- real commodity prices,
- trade openness,
- the fiscal balance,
- the extent of net foreign assets.
- On the basis of these fundamentals, the real exchange rate in early 2002 was found to be significantly more depreciated with respect to the estimated equilibrium level.
- The half-life of the deviation of the real exchange rate from the estimated equilibrium one was found to be somewhat more than two years.
Scope and topics
- Subjects: Commodity prices; External position; Financial services; Foreign assets; Foreign exchange; Prices; Real effective exchange rates; Real exchange rates; Real interest rates.
- Keywords: Africa; commodity; commodity exporter; Commodity prices; equilibrium exchange rate; equilibrium real exchange rate; exchange rate; explanatory variables; Foreign assets; price; price equalization; productivity differential; Real effective exchange rates; Real exchange rates; real interest rate differential; Real interest rates; trading partner; vis-à-vis trading-partner country; WP.
Ronald MacDonald, Luca A Ricci. "Estimation of the Equilibrium Real Exchange Rate for South Africa", IMF Working Papers 2003, 044 (2003), March 1, 2003.
Content in this bundle
- Estimation of the Equilibrium Real Exchange Rate for South Africa - WP/03/44