Direct versus indirect forecasting of the defined real exchange rate of South Africa
- Pretorius, Marinda, Botha, Ilsé
- Authors: Pretorius, Marinda , Botha, Ilsé
- Date: 2010
- Subjects: Foreign exchange rates - South Africa - Forecasting
- Type: Article
- Identifier: uj:5525 , ISSN 16059786 , http://hdl.handle.net/10210/13931
- Description: The real exchange rate of South Africa can be forecasted using the direct or the indirect methods of forecasting. This article compares the forecasting results of direct and indirect forecasting of the real exchange rate by using two multivariate model. and a multivariate model. The direct models outperformed the indirect models in-sample and the indirect models generally outperformed the direct models out-of-sample. Given the closeness of the forecasting results, the modeller should decide whether it is worth the effort to forecast the real exchange rate indirectly if similar results can be obtained from a (less time-consuming) direct method.
- Full Text:
- Authors: Pretorius, Marinda , Botha, Ilsé
- Date: 2010
- Subjects: Foreign exchange rates - South Africa - Forecasting
- Type: Article
- Identifier: uj:5525 , ISSN 16059786 , http://hdl.handle.net/10210/13931
- Description: The real exchange rate of South Africa can be forecasted using the direct or the indirect methods of forecasting. This article compares the forecasting results of direct and indirect forecasting of the real exchange rate by using two multivariate model. and a multivariate model. The direct models outperformed the indirect models in-sample and the indirect models generally outperformed the direct models out-of-sample. Given the closeness of the forecasting results, the modeller should decide whether it is worth the effort to forecast the real exchange rate indirectly if similar results can be obtained from a (less time-consuming) direct method.
- Full Text:
Essays on sovereign credit ratings in Africa
- Authors: Pretorius, Marinda
- Date: 2017
- Subjects: Credit ratings - Africa , Investments - Decision making , Investments - Africa
- Language: English
- Type: Doctoral (Thesis)
- Identifier: http://hdl.handle.net/10210/245818 , uj:25468
- Description: Ph.D. (Finance) , Abstract: The investment potential of countries is normally reflected in their sovereign credit ratings. However, if a country does not have a formal credit rating or if a rating does not reflect the true potential of a country, investors will not make optimal investment decisions, which will be to the detriment of sovereigns as well. This scenario is unfortunately the reality of a great deal of African sovereigns. The majority of African sovereigns do not have a formal credit rating yet and the quality of already rated African countries is questionable. This has a substantial negative influence on much needed investment inflows to the continent (Kim and Wu, 2008). Moreover, Africa is plagued by certain weaknesses such as Ebola, HIV/Aids, armed conflicts, corruption, poverty and droughts; all of which create uncertainty and increase the risk for potential African investors. However, Africa is classified as the second most attractive investment destination in the world (World Bank, 2015a); therefore, attaining a formal sovereign credit rating can be beneficial to sovereigns on this continent. Sovereign credit ratings can aid in the development of financial markets in a country: unlocking the growth potential through optimising the use of resources and channelling savings and investment (Kim and Wu, 2008). The responsibility to uphold a sovereign rating may aid in improving capital flows to developing countries in Africa. The market is dominated by only three major global agencies, which might indicate some underinvestment in the ratings of less developed countries. Investors are unaware of this underinvestment by rating agencies and base their decisions on inefficient credit ratings or they will have to supplement given credit ratings with additional information. African countries do not need any credit ratings: they need accurate ratings that mirror the actual potential of the continent. This means that credit rating agencies have to fully ‘invest’ in the rating assignment process of African sovereigns. The initiating research question for this study was to determine if credit rating agencies invest enough time and effort into determining accurate sovereign credit ratings of African countries, so that it is a true reflection of the economic, financial and political milieu of the continent. In order to answer this research question, the first and second...
- Full Text:
- Authors: Pretorius, Marinda
- Date: 2017
- Subjects: Credit ratings - Africa , Investments - Decision making , Investments - Africa
- Language: English
- Type: Doctoral (Thesis)
- Identifier: http://hdl.handle.net/10210/245818 , uj:25468
- Description: Ph.D. (Finance) , Abstract: The investment potential of countries is normally reflected in their sovereign credit ratings. However, if a country does not have a formal credit rating or if a rating does not reflect the true potential of a country, investors will not make optimal investment decisions, which will be to the detriment of sovereigns as well. This scenario is unfortunately the reality of a great deal of African sovereigns. The majority of African sovereigns do not have a formal credit rating yet and the quality of already rated African countries is questionable. This has a substantial negative influence on much needed investment inflows to the continent (Kim and Wu, 2008). Moreover, Africa is plagued by certain weaknesses such as Ebola, HIV/Aids, armed conflicts, corruption, poverty and droughts; all of which create uncertainty and increase the risk for potential African investors. However, Africa is classified as the second most attractive investment destination in the world (World Bank, 2015a); therefore, attaining a formal sovereign credit rating can be beneficial to sovereigns on this continent. Sovereign credit ratings can aid in the development of financial markets in a country: unlocking the growth potential through optimising the use of resources and channelling savings and investment (Kim and Wu, 2008). The responsibility to uphold a sovereign rating may aid in improving capital flows to developing countries in Africa. The market is dominated by only three major global agencies, which might indicate some underinvestment in the ratings of less developed countries. Investors are unaware of this underinvestment by rating agencies and base their decisions on inefficient credit ratings or they will have to supplement given credit ratings with additional information. African countries do not need any credit ratings: they need accurate ratings that mirror the actual potential of the continent. This means that credit rating agencies have to fully ‘invest’ in the rating assignment process of African sovereigns. The initiating research question for this study was to determine if credit rating agencies invest enough time and effort into determining accurate sovereign credit ratings of African countries, so that it is a true reflection of the economic, financial and political milieu of the continent. In order to answer this research question, the first and second...
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Financial challenges and the subjective well‑being of first‑year students at a comprehensive South African university
- Pretorius, Marinda, Blaauw, Derick
- Authors: Pretorius, Marinda , Blaauw, Derick
- Date: 2020
- Subjects: Determinants , Happiness , Subjective well‑being
- Language: English
- Type: Article
- Identifier: http://hdl.handle.net/10210/431485 , uj:37232 , Citation: Pretorius, M. & Blaauw, D. 2020. Financial challenges and the subjective well‑being of first‑year students at a comprehensive South African university. , DOI: 10.24085/jsaa.v8i1.3824
- Description: Abstract: Since 1994, there has been a doubling in the enrolment of students in South Africa’s public universities. Students, especially first-generation students, face numerous challenges that may impact their subjective perceptions of their well‑being. In a milieu of high levels of suicide and depression amongst South Africa’s student population, the understanding of the variables determining students’ subjective well‑being (SWB) should be deepened. This article investigates the levels and changes in the SWB of successive groups of first‑year students at a comprehensive university in South Africa between 2014 and 2017. It makes use of a fit-for-purpose survey instrument. The results show that the SWB of students is influenced positively by their living arrangements and variables that have a direct influence on the educational environment in which they operate, such as feeling ‘at home’ and an overall level of satisfaction of the students’ experience at the university. Negative variables that influence the SWB of students include concerns regarding finances and upcoming tests, and living on campus or within walking distance of campus.
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- Authors: Pretorius, Marinda , Blaauw, Derick
- Date: 2020
- Subjects: Determinants , Happiness , Subjective well‑being
- Language: English
- Type: Article
- Identifier: http://hdl.handle.net/10210/431485 , uj:37232 , Citation: Pretorius, M. & Blaauw, D. 2020. Financial challenges and the subjective well‑being of first‑year students at a comprehensive South African university. , DOI: 10.24085/jsaa.v8i1.3824
- Description: Abstract: Since 1994, there has been a doubling in the enrolment of students in South Africa’s public universities. Students, especially first-generation students, face numerous challenges that may impact their subjective perceptions of their well‑being. In a milieu of high levels of suicide and depression amongst South Africa’s student population, the understanding of the variables determining students’ subjective well‑being (SWB) should be deepened. This article investigates the levels and changes in the SWB of successive groups of first‑year students at a comprehensive university in South Africa between 2014 and 2017. It makes use of a fit-for-purpose survey instrument. The results show that the SWB of students is influenced positively by their living arrangements and variables that have a direct influence on the educational environment in which they operate, such as feeling ‘at home’ and an overall level of satisfaction of the students’ experience at the university. Negative variables that influence the SWB of students include concerns regarding finances and upcoming tests, and living on campus or within walking distance of campus.
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Forecasting the exchange rate in South Africa : a comparative analysis challenging the random walk model
- Botha, Ilsé, Pretorius, Marinda
- Authors: Botha, Ilsé , Pretorius, Marinda
- Date: 2009
- Subjects: Foreign exchange rates - South Africa - Forecasting
- Type: Article
- Identifier: uj:5526 , ISSN 1993-8233 , http://hdl.handle.net/10210/13933
- Description: Literature shows that exchange rates are largely unpredictable, and that a simple random walk outperforms structural exchange rate models. In order to determine whether fundamentals explain exchange rate behaviour in South Africa, the two approaches to exchange rate forecasting - the technical and fundamental approach - will be compared. Various univariate time series models, including the random walk model, will be compared to various multivariate time series models (using the MAD/mean ratio), combining the two approaches. The determinants of the South African exchange rate are identified, and these determinants are used to specify multivariate time series models for the South African exchange rate. The multivariate models (VARMA) outperformed the univariate models (except for the Random walk model) in the short-run forecasts, one step ahead, while the multivariate models, performed better in the longer-run forecasts. To improve the accuracy of especially the multivariate models, it is recommended that multiple frequencies be used to capture the dynamic behaviour between variables in a Structural VAR framework.
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- Authors: Botha, Ilsé , Pretorius, Marinda
- Date: 2009
- Subjects: Foreign exchange rates - South Africa - Forecasting
- Type: Article
- Identifier: uj:5526 , ISSN 1993-8233 , http://hdl.handle.net/10210/13933
- Description: Literature shows that exchange rates are largely unpredictable, and that a simple random walk outperforms structural exchange rate models. In order to determine whether fundamentals explain exchange rate behaviour in South Africa, the two approaches to exchange rate forecasting - the technical and fundamental approach - will be compared. Various univariate time series models, including the random walk model, will be compared to various multivariate time series models (using the MAD/mean ratio), combining the two approaches. The determinants of the South African exchange rate are identified, and these determinants are used to specify multivariate time series models for the South African exchange rate. The multivariate models (VARMA) outperformed the univariate models (except for the Random walk model) in the short-run forecasts, one step ahead, while the multivariate models, performed better in the longer-run forecasts. To improve the accuracy of especially the multivariate models, it is recommended that multiple frequencies be used to capture the dynamic behaviour between variables in a Structural VAR framework.
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Kwesbare groepe in die informele ekonomie : ʼn Gevallestudie van motorwagte in Johannesburg se Wesrand
- Pretorius, Marinda, Blaauw, Derick
- Authors: Pretorius, Marinda , Blaauw, Derick
- Date: 2019
- Subjects: Car guards , Informal economy , Vulnerability
- Language: Afrikaans
- Type: Article
- Identifier: http://hdl.handle.net/10210/407375 , uj:34288 , Citation: Pretorius, M. & Blaauw, D. 2019. Kwesbare groepe in die informele ekonomie : ʼn Gevallestudie van motorwagte in Johannesburg se Wesrand.
- Description: Abstract: South Africa’s high levels of car-related crime and spiralling unemployment have resulted in the development of a distinctive South African practice where people are looking after vehicles in shopping malls’ parking sites in exchange for a fee during the last 25 years. People who have lost their work or who never had a formal job in the past could work as a car guard in South Africa. Here, they enjoy little if any of the protection that the labour dispensation provides formal workers. They are therefore indeed an extremely vulnerable group in the informal sector. This article is based on a survey among 110 car guards in Roodepoort and Crown Mines in 2017 with the aim to investigate the socio-economic vulnerability of car guards. Car guards are both socially and economically vulnerable. Besides earning a low income, they are also required to pay a considerable portion of their income to shopping centres or car guard agencies. The average car guard in the survey earns between R7.31 and R21.94 per hour. The average fee per hour was calculated at R12.60 at the time of the survey. The current minimum hourly wage in South Africa is R20. This implies that the average car guard earns less per hour than the official minimum wage in the country. If one keeps in mind that these are gross amounts (the car guards must often pay a daily fee to a car guard organisation from this income), then the economic vulnerability of car guards is obvious. Their economic situation is therefore extremely vulnerable. This vulnerability is worsened by the uncertainty with regard to future income. Their working conditions expose them to various health risks as they are prone to fluctuating weather conditions, such as severe heat and cold, on a daily basis. If they do not work (because of, for example, illness), they earn no income. The researchers identified several possible limitations during the research. In some instances, the language proficiency of the foreign born car guards was indeed a challenge. In these cases, fellow car guards were able to act as interpreters in order to complete the interview. We realise that the sample cannot be used to generalise conclusions for the whole of South Africa. However, the results broadly corroborate the results of surveys in Pretoria (Steyn 2018) and Durban (Foster & Chasomeris 2017). It should be clear that car guards, as is the case with other groupings in the informal economy (e.g. day labourers and waste pickers), experience vulnerability on both social and economic levels. The results of this survey emphasise that a number of questions and uncertainties in terms of the car guard industry remain. These require the attention of researchers. One of the most important points on any future research agenda, will have to be the role of car guard agencies as labour brokers. These brokers apparently take very few risks, yet receive a significant portion of the tips earned by car guards. It is crucial that their role and activities be analysed economically. The second critical aspect requiring further research, is the role of foreign born migrants in the car guard industry in South Africa. This is a conclusion based on this article but also corroborated by the work of Steyn (2018). The mere fact that such a high proportion of car guards in this survey is foreign born, puts a new perspective on the future analysis of the industry. This issue can no longer be ignored. South Africa remains a destination of choice for many immigrants who have to leave their country of origin for political and economic reasons. The renewed economic crisis in, for example, Zimbabwe and the lack of food and employment opportunities in other Southern African countries are push factors which inevitably result in a constant supply of immigrants to South Africa. Once here, they often compete with South African citizens for limited opportunities in the informal economy. These foreign workers are especially...
- Full Text:
- Authors: Pretorius, Marinda , Blaauw, Derick
- Date: 2019
- Subjects: Car guards , Informal economy , Vulnerability
- Language: Afrikaans
- Type: Article
- Identifier: http://hdl.handle.net/10210/407375 , uj:34288 , Citation: Pretorius, M. & Blaauw, D. 2019. Kwesbare groepe in die informele ekonomie : ʼn Gevallestudie van motorwagte in Johannesburg se Wesrand.
- Description: Abstract: South Africa’s high levels of car-related crime and spiralling unemployment have resulted in the development of a distinctive South African practice where people are looking after vehicles in shopping malls’ parking sites in exchange for a fee during the last 25 years. People who have lost their work or who never had a formal job in the past could work as a car guard in South Africa. Here, they enjoy little if any of the protection that the labour dispensation provides formal workers. They are therefore indeed an extremely vulnerable group in the informal sector. This article is based on a survey among 110 car guards in Roodepoort and Crown Mines in 2017 with the aim to investigate the socio-economic vulnerability of car guards. Car guards are both socially and economically vulnerable. Besides earning a low income, they are also required to pay a considerable portion of their income to shopping centres or car guard agencies. The average car guard in the survey earns between R7.31 and R21.94 per hour. The average fee per hour was calculated at R12.60 at the time of the survey. The current minimum hourly wage in South Africa is R20. This implies that the average car guard earns less per hour than the official minimum wage in the country. If one keeps in mind that these are gross amounts (the car guards must often pay a daily fee to a car guard organisation from this income), then the economic vulnerability of car guards is obvious. Their economic situation is therefore extremely vulnerable. This vulnerability is worsened by the uncertainty with regard to future income. Their working conditions expose them to various health risks as they are prone to fluctuating weather conditions, such as severe heat and cold, on a daily basis. If they do not work (because of, for example, illness), they earn no income. The researchers identified several possible limitations during the research. In some instances, the language proficiency of the foreign born car guards was indeed a challenge. In these cases, fellow car guards were able to act as interpreters in order to complete the interview. We realise that the sample cannot be used to generalise conclusions for the whole of South Africa. However, the results broadly corroborate the results of surveys in Pretoria (Steyn 2018) and Durban (Foster & Chasomeris 2017). It should be clear that car guards, as is the case with other groupings in the informal economy (e.g. day labourers and waste pickers), experience vulnerability on both social and economic levels. The results of this survey emphasise that a number of questions and uncertainties in terms of the car guard industry remain. These require the attention of researchers. One of the most important points on any future research agenda, will have to be the role of car guard agencies as labour brokers. These brokers apparently take very few risks, yet receive a significant portion of the tips earned by car guards. It is crucial that their role and activities be analysed economically. The second critical aspect requiring further research, is the role of foreign born migrants in the car guard industry in South Africa. This is a conclusion based on this article but also corroborated by the work of Steyn (2018). The mere fact that such a high proportion of car guards in this survey is foreign born, puts a new perspective on the future analysis of the industry. This issue can no longer be ignored. South Africa remains a destination of choice for many immigrants who have to leave their country of origin for political and economic reasons. The renewed economic crisis in, for example, Zimbabwe and the lack of food and employment opportunities in other Southern African countries are push factors which inevitably result in a constant supply of immigrants to South Africa. Once here, they often compete with South African citizens for limited opportunities in the informal economy. These foreign workers are especially...
- Full Text:
Leads and lags in African sovereign credit ratings
- Pretorius, Marinda, Botha, Ilse
- Authors: Pretorius, Marinda , Botha, Ilse
- Date: 2021
- Subjects: Africa , Sovereign credit ratings , Leaders
- Language: English
- Type: Article
- Identifier: http://hdl.handle.net/10210/481518 , uj:43633 , Citation: Pretorius, M. & Botha, I. (2021) Leads and Lags in African Sovereign Credit Ratings, Journal of African Business, 22:2, 235-253, DOI: 10.1080/15228916.2020.1745009
- Description: Abstract: The majority of sovereign nations have a formal credit rating from more than one credit rating agency in order to bridge the potential informational gap that goes with only one formal rating. This study investigates the behaviour of rating agencies to determine if the African sovereign ratings by the three major credit rating agencies are different and if their rating actions have any influence on each other. The lead-lag relationships between the agencies are investigated by making use of a method similar to the Granger causality test in an ordered probit pooled-data and individual country time-series setting. The monthly rating changes for the three agencies were used for 12 African countries from 2009 to 2018. The results show that when general rating changes are taken into account, Moody’s follows Fitch in more instances than Fitch follows Moody’s. Furthermore, when upgrade and downgrade actions are taken into account, Standard and Poor’s leads Fitch during all downgrade periods and in some periods after a rating upgrade. It is also shown that Fitch leads Moody’s during all downgrade periods and in some periods after a rating upgrade. In terms of individual country results, for 7 of the 12 countries there is no evidence of herding or habit behaviour between any of the rating pairs. Herding behaviour was identified between different pairs of rating agencies for Angola, Egypt, Mozambique, South Africa and Tunisia. Fitch exhibits habit behaviour for Mozambique, whereas Standard and Poor’s shows contrarian habit behaviour for that country.
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- Authors: Pretorius, Marinda , Botha, Ilse
- Date: 2021
- Subjects: Africa , Sovereign credit ratings , Leaders
- Language: English
- Type: Article
- Identifier: http://hdl.handle.net/10210/481518 , uj:43633 , Citation: Pretorius, M. & Botha, I. (2021) Leads and Lags in African Sovereign Credit Ratings, Journal of African Business, 22:2, 235-253, DOI: 10.1080/15228916.2020.1745009
- Description: Abstract: The majority of sovereign nations have a formal credit rating from more than one credit rating agency in order to bridge the potential informational gap that goes with only one formal rating. This study investigates the behaviour of rating agencies to determine if the African sovereign ratings by the three major credit rating agencies are different and if their rating actions have any influence on each other. The lead-lag relationships between the agencies are investigated by making use of a method similar to the Granger causality test in an ordered probit pooled-data and individual country time-series setting. The monthly rating changes for the three agencies were used for 12 African countries from 2009 to 2018. The results show that when general rating changes are taken into account, Moody’s follows Fitch in more instances than Fitch follows Moody’s. Furthermore, when upgrade and downgrade actions are taken into account, Standard and Poor’s leads Fitch during all downgrade periods and in some periods after a rating upgrade. It is also shown that Fitch leads Moody’s during all downgrade periods and in some periods after a rating upgrade. In terms of individual country results, for 7 of the 12 countries there is no evidence of herding or habit behaviour between any of the rating pairs. Herding behaviour was identified between different pairs of rating agencies for Angola, Egypt, Mozambique, South Africa and Tunisia. Fitch exhibits habit behaviour for Mozambique, whereas Standard and Poor’s shows contrarian habit behaviour for that country.
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The impact of exchange rate volatility on emerging market exports
- Khosa, Johannes, Botha, Ilsé, Pretorius, Marinda
- Authors: Khosa, Johannes , Botha, Ilsé , Pretorius, Marinda
- Date: 2015
- Subjects: Foreign exchange rates - Volatility
- Type: Article
- Identifier: uj:5529 , ISSN 16841999 , http://hdl.handle.net/10210/13939
- Description: Orientation: High exchange rate volatility has implications for business and policy decisions and exchange rate movements are important in debates around trade and trade policies. Research purpose: The purpose of the research was to determine the impact of exchange rate volatility on exports in emerging markets. Motivation for the study: A lack of clarity in literature regarding this relationship increases the risk of improper planning by export organisations as well as implementing suboptimal economic policies. Research design, approach and method: This research analysed the effect of exchange rate volatility on emerging market exports using a sample of nine emerging countries from 1995 to 2010. Panel data analysis was conducted. Volatility was measured by Generalised Autoregressive Conditional Heteroscedasticity and conventional standard deviation in order to determine if the instrument of volatility used influenced the nature of the relationship between exchange rate volatility and exports. The Pedroni residual cointegration method was used to test for panel cointegration in order to determine if there was a long-run relationship. Main findings: The results showed that exchange rate volatility had a significant negative effect on the performance of exports, regardless of the measure of volatility used. It was also evident that a long-run relationship did exist. Practical/managerial implications: The study concluded that the policy mix that will reduce exchange rate volatility (such as managed exchange rate regimes) and relatively competitive exchange rates were essential for emerging markets in order to sustain their exports performance. Contribution/value-add: This research provided policy makers of emerging market economies with new evidence pertaining to the relationship between exchange rate volatility and the performance of exports. This research contributed to the existing knowledge on the topic and provides a base for future research on related topics.
- Full Text:
- Authors: Khosa, Johannes , Botha, Ilsé , Pretorius, Marinda
- Date: 2015
- Subjects: Foreign exchange rates - Volatility
- Type: Article
- Identifier: uj:5529 , ISSN 16841999 , http://hdl.handle.net/10210/13939
- Description: Orientation: High exchange rate volatility has implications for business and policy decisions and exchange rate movements are important in debates around trade and trade policies. Research purpose: The purpose of the research was to determine the impact of exchange rate volatility on exports in emerging markets. Motivation for the study: A lack of clarity in literature regarding this relationship increases the risk of improper planning by export organisations as well as implementing suboptimal economic policies. Research design, approach and method: This research analysed the effect of exchange rate volatility on emerging market exports using a sample of nine emerging countries from 1995 to 2010. Panel data analysis was conducted. Volatility was measured by Generalised Autoregressive Conditional Heteroscedasticity and conventional standard deviation in order to determine if the instrument of volatility used influenced the nature of the relationship between exchange rate volatility and exports. The Pedroni residual cointegration method was used to test for panel cointegration in order to determine if there was a long-run relationship. Main findings: The results showed that exchange rate volatility had a significant negative effect on the performance of exports, regardless of the measure of volatility used. It was also evident that a long-run relationship did exist. Practical/managerial implications: The study concluded that the policy mix that will reduce exchange rate volatility (such as managed exchange rate regimes) and relatively competitive exchange rates were essential for emerging markets in order to sustain their exports performance. Contribution/value-add: This research provided policy makers of emerging market economies with new evidence pertaining to the relationship between exchange rate volatility and the performance of exports. This research contributed to the existing knowledge on the topic and provides a base for future research on related topics.
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The relationship between the exchange rate and the trade balance in South Africa
- Chiloane, Lebogang, Pretorius, Marinda, Botha, Ilsé
- Authors: Chiloane, Lebogang , Pretorius, Marinda , Botha, Ilsé
- Date: 2014
- Subjects: J-curve , Marshall–Lerner , Vector auto regression , Cointegration , Impulse response function , Foreign exchange rates - South Africa , Trade balance - South Africa , Manufacturing industries - South Africa
- Type: Article
- Identifier: uj:5530 , ISSN 19957076 , http://hdl.handle.net/10210/13941
- Description: The purpose of this paper is to test the existence of the J-curve effect and to show whether the Marshall–Lerner condition holds in the South African manufacturing sector. Using quarterly data from 1995 to 2010, the study uses the vector error correction modelling technique as well as impulse response functions to attain the research objectives. The results show that a long-run equilibrium relationship exists between the manufacturing trade balance and the three explanatory variables: real effective exchange rate, real domestic and foreign income levels. Overall, the results show that a depreciation in the domestic currency results in a deterioration in the manufacturing trade balance in the short run, and that this is followed by an improvement in the long run. The study finds evidence of the existence of the J-curve in the South African manufacturing sector. The long-run dynamics suggest that the Marshall–Lerner condition holds.
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- Authors: Chiloane, Lebogang , Pretorius, Marinda , Botha, Ilsé
- Date: 2014
- Subjects: J-curve , Marshall–Lerner , Vector auto regression , Cointegration , Impulse response function , Foreign exchange rates - South Africa , Trade balance - South Africa , Manufacturing industries - South Africa
- Type: Article
- Identifier: uj:5530 , ISSN 19957076 , http://hdl.handle.net/10210/13941
- Description: The purpose of this paper is to test the existence of the J-curve effect and to show whether the Marshall–Lerner condition holds in the South African manufacturing sector. Using quarterly data from 1995 to 2010, the study uses the vector error correction modelling technique as well as impulse response functions to attain the research objectives. The results show that a long-run equilibrium relationship exists between the manufacturing trade balance and the three explanatory variables: real effective exchange rate, real domestic and foreign income levels. Overall, the results show that a depreciation in the domestic currency results in a deterioration in the manufacturing trade balance in the short run, and that this is followed by an improvement in the long run. The study finds evidence of the existence of the J-curve in the South African manufacturing sector. The long-run dynamics suggest that the Marshall–Lerner condition holds.
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