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Title:Nominal and real exchange rate models in South Africa: How robust are they? PDF Logo
Authors:Egert, Balazs
Issue Date:2012
Series/Report no.:CESifo Working Paper: Monetary Policy and International Finance 3853
Abstract:This paper addresses difficulties in modelling exchange rates in South Africa. Real exchange rate models of earlier research seem to be sensitive to the sample period considered, alternative variable definition, data frequency and estimation methods. Alternative exchange rate models proposed in this paper including the stock-flow approach and variants of the monetary model are not fully robust to data frequency and alternative estimation periods, either. Nevertheless, adding openness to the stock-flow approach and augmenting the monetary model with share prices and the country risk premium improves significantly the fit of the models around the large (nominal and real) depreciation episodes of 2002 and 2008. Interestingly, real commodity prices do not help explain the large depreciations. While these models do a reasonably good job in-sample, their out-of-sample forecasting properties remain poor.
Subjects:exchange rate
real exchange rate
nominal exchange rate
commodity
Balassa-Samuelson
productivity
monetary model
stock-flow approach
openness
country risk
JEL:E31
F31
O11
P17
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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