Real Effective Exchange Rates Comovements and the South African Currency

Leroi RAPUTSOANE

Abstract


Abstract. The study analyses comovement between the real effective exchange rate of South Africa and those of a sample of countries that include the world’s major economies as well as emerging and developing economies. The comovement is examined over the short and long term as well as pre and post the recent global financial crisis. The results show that, although the real effective exchange rate of South Africa shows some comovement with those of the selected countries, such comovement is mixed and inconsistent. Currencies that belong to a similar grouping in terms of economic development and geographical location display both positive and negative comovement with the real effective exchange rate of South Africa. There is also no consistency in the comovement between the real effective exchange rate of South Africa and those of the selected countries pre and post the recent financial crisis. The results further show that the comovement between the real effective exchange rate of South Africa and those of some of the selected sample of countries is stronger between the trend component than it is between the cyclical component.

Keywords. Comovements, Real effective exchange rate, Financial crisis.

JEL. C11, C22, F31, F42.


Keywords


Comovements, Real effective exchange rate, Financial crisis

Full Text:


References


Amini, S., & Parmeter, C. (2011). Bayesian model averaging in R, Journal of Economic and Social Measurement, 36(4), 253-287. doi. 10.3233/JEM-2011-0350

Amini, S., & Parmeter, C. (2012). A review of the BMS package for R, Bayesian model averaging in R, Journal of Applied Econometrics, 27(5), 870-876. doi. 10.1002/jae.2288

Archer, D. (2005). Foreign Exchange Market Intervention: Methods and Tactics, Working Paper, 24, Bank for International Settlements

Bartels, L. (1997). Specification uncertainty and model averaging, American Journal of Political Science, 41(2), 641-674.

Botman, D., IFilho, I., & W. Raphael L.R. (2013). The Curious Case of the Yen as a Safe Haven Currency: A Forensic Analysis, Working Paper, 13/228, IMF, November

Darvas, Z. (2012a). Real Effective Exchange Rates for 178 Countries: A New Database, Working Paper, 2012/06, Bruegel.

Darvas, Z. (2012b). Compositional Effects on Productivity, Labour Cost and Export Adjustment, Policy Contribution, 2012/11, Bruegel.

Darvas, Z. (2012c). Productivity, Labour Cost and Export Adjustment: Detailed Results for 24 EU Countries, Working Paper, 2012/11, Bruegel

Engel, C., & West, K. (2004). Exchange Rates and Fundamentals, Working Paper, 10723, National Bureau of Economic Research

Feldkircher, M., & Zeugner, S. (2009). Benchmark Priors Revisited: On Adaptive Shrinkage and the Supermodel Effect in Bayesian Model Averaging, Working Paper, 09/202, Washington DC: International Monetary Fund, September.

Frankel, J., & Wei, S. (2008). Estimation of de facto exchange rate regimes: Synthesis of the techniques for inferring flexibility and basket weights. IMF Staff Papers 55 (3): 384-416

Global Economic Prospects, (2012). Exchange Rates, Annex, Global Economic Prospects, 29-35

Habib, M., & Stracca, L. (2013). Foreign Investors and Risk Shocks: Seeking a Safe Haven or Running for The Exit, Working Paper, 1609, European Central Bank

Hamori, S., & Tamakoshi, G. (2014). Comovements among major European exchange rates: A multivariate timevarying asymmetric approach, 31C: 105-113

Hodrick, R., & Prescott, E. (1997). Postwar U.S. business cycles: An empirical investigation, Journal of Money, Credit and Banking, 29(1), 1-16.

Hoeting, J., Madigan, D., Raftery, A., & Volinsky, C. (1999). Bayesian model averaging: A tutorial, Statistical Science, 14(4), 382-417.

International Monetary Fund. (2006). De Facto Classification of Exchange Rate Regimes and Monetary Policy Framework, International Monetary Fund

Kriljenko, J., Guimaraes, R., & Karacadag, C. (2003). Official Intervention in the Foreign Exchange Market: Elements of Best Practice, Working Paper, 03/152, International Monetary Fund

Kia, A. (2013). Determinants of the real exchange rate in a small open economy: Evidence from Canada, Journal of International Financial Markets, Institutions and Money, 23, 163-178. doi. 10.1016/j.intfin.2012.09.001

Kuhl, M. 2008. Strong Comovements of Exchange Rates: Theoretical and Empirical Cases When Currencies Become the Same Asset, Discussion Paper, 76, Center for European Governance and Economic Development Research

Leamer, E. (1978). Specification Searches: Ad Hoc Inference with Nonexperimental Data, Wiley, New York

Mise, E., Kimand, T., & Newbold, P. (2005). On suboptimality of the Hodrick-Prescott filter at time series endpoints, Journal of Macroeconomics, 27(1), 53-67. doi. 10.1016/j.jmacro.2003.09.003

Miyajima, K. (2013). Foreign Exchange Intervention And Expectation In Emerging Economies, Working Paper, 414, Bank for International Settlements

Orlov, A. (2009). A cospectral analysis of exchange rate comovements during Asian financial crisis, Journal of International Financial Markets, Institutions and Money, 19(5), 742-758. doi. 10.1016/j.intfin.2008.12.004

Ozer-Imer, I., & Ozkan, I. (2013). On the co-movements of exchange rates, in Mirdala, R. ed., Financial Aspects of Recent Trends in the Global Economy, 21, 12-37, ASERS Publishing.

Rangel, J.G. (2011). FX Comovement: Disentangling the Role of Market Factors, Carry-Trades and Idiosyncratic Components, Conference Paper, CCA-009, Bank for International Settlements

Raputsoane, L. (2008). Exchange rate volatility spillovers and the South African currency, Conference Paper, Trade and Industrial Policy Strategies, October

Accessed:http://www.tips.org.za/files/Leroi_Exchange_rate_volatility_spillovers-24_Oct_2008.pdf

Varian, H. (2014). Big data: New tricks for econometrics, Journal of Economic Perspectives, 28(2), 3-28. doi. 10.1257/jep.28.2.3

Zellner, A. (1986). On Assessing Prior Distributions and Bayesian Regression Analysis with g-prior Distributions, in Goel, P.K. and Zellner, A. (Eds), Bayesian Inference and Decision Techniques: Essays in Honour of Bruno de Finetti, Amsterdam

Zeugner, S. (2012). Bayesian Model Averaging with BMS, R-package, 0.3.1, The R Project for Statistical Computing




DOI: http://dx.doi.org/10.1453/jel.v3i1.623

Refbacks

  • There are currently no refbacks.


.......................................................................................................................................................................................................................................................................................................................................

Journal of Economics Library - J. Econ. Lib. - JEL - www.kspjournals.org

ISSN: 2149-2379

Editor: jel@ksplibrary.org Secretarial: secretarial@ksplibrary.org   Istanbul - Turkey.

Copyright © KSP Library