Exchange Rate Undervaluation and Sectoral Performance of the South African Economy

Njindan Iyke, Bernard (2016): Exchange Rate Undervaluation and Sectoral Performance of the South African Economy.

Abstract

The paper uncovers the channels through which real exchange rate undervaluation influences the performance of the South African economy. We decompose the South African economy into three sectors, namely: agriculture, industry, and service. Using the OLS (with Newey-West and robust standard errors), and GMM estimation techniques; an annual time series data covering the period 1962-2014; and a standard regression model for each sector, we find: (i) real exchange rate undervaluation to exert positive impact on economic performance by enhancing agricultural sector, and industrial sector performance; (ii) real exchange rate undervaluation to exert a negative impact on economic performance by reducing the performance of the service sector.

• Item Type: MPRA Paper
• Language: English
• Keywords: Exchange Rate Undervaluation, Sectoral Performance, South Africa
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment ; Long-Term Capital Movements; F - International Economics > F3 - International Finance > F31 - Foreign Exchange

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