Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/211259 
Year of Publication: 
2019
Series/Report no.: 
WIDER Working Paper No. 2019/29
Publisher: 
The United Nations University World Institute for Development Economics Research (UNU-WIDER), Helsinki
Abstract: 
This study investigates the effect of real exchange rate volatility on the distribution of income between labour and capital in South Africa. Both symmetric and asymmetric effects are considered. Using quarterly data for 1985:1-2018:3 and local linear projection, we find that the immediate response of labour's income share to a one standard deviation shock in exchange rate volatility is negative. Moreover, high exchange rate volatility impacts negatively on labour's income share, while low exchange rate volatility impacts positively on labour income. As the magnitude of the effect of high exchange rate volatility is greater than that of low exchange rate volatility, the study documents evidence of an asymmetric effect. A shock increase in some control variables (real gross domestic product, investment, and openness) is followed immediately by a decline in labour income, while an increase follows a positive shock in the relative price of investment. The policy implications of these findings are discussed.
Subjects: 
functional distribution of income
inequality
real effective exchange rate volatility
South Africa
uncertainty
JEL: 
E25
F31
F41
J38
Persistent Identifier of the first edition: 
ISBN: 
978-92-9256-663-0
Document Type: 
Working Paper

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