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Estimation of the Equilibrium Real Exchange Rate for South Africa
Author:
Mr. Ronald MacDonald null

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Mr. Luca A Ricci
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Series:
IMF Working Papers
Volume/Issue:
Volume 2003: Issue 044
Language:
English
Publication Date:
01 Mar 2003
DOI:
https://doi.org/10.5089/9781451846430.001
ISBN:
9781451846430
ISSN:
1018-5941
Pages:
24
Keywords:
WP; exchange rate; price; commodity; trading partner; equilibrium real exchange rate; vis-à-vis trading-partner country; real interest rate differential; price equalization; equilibrium exchange rate; commodity exporter; productivity differential; explanatory variables; Real exchange rates; Real effective exchange rates; Real interest rates; Foreign assets; Commodity prices; Africa
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund