Estimation of the Equilibrium Real Exchange Rate for South Africa

March 1, 2003

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Format: Chicago

Ronald MacDonald, and Luca A Ricci. Estimation of the Equilibrium Real Exchange Rate for South Africa, (USA: International Monetary Fund, 2003) accessed December 26, 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

Based on the Johansen cointegration estimation methodology, 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, and 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.

Subject: 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

Publication Details

Pages:

24
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2003/044
Stock No:

WPIEA0442003
ISBN:

9781451846430
ISSN:

1018-5941

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