Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/243398 
Year of Publication: 
2021
Series/Report no.: 
WIDER Working Paper No. 2021/72
Publisher: 
The United Nations University World Institute for Development Economics Research (UNU-WIDER), Helsinki
Abstract: 
This study investigates the impacts of public expenditure innovations on exchange rate volatility in South Africa using quarterly data for the period 1970-2019. To achieve this objective, a version of the vector autoregressive impulse response model proposed by Jordà is employed and the innovations are identified recursively. The impulse response functions indicate that public expenditure innovation has a significant depreciating trend impact on exchange rate volatility, and its impact relies on the type of fiscal expenditure innovation. While the impact of public expenditure innovation on exchange rate volatility does not rely on the direction of the innovation, it varies according to the state of the economy. Public expenditure innovation has a depreciating trend impact on exchange rate volatility in the upturn state, and mostly an appreciating trend impact in the downturn state. The impact is greater in the upturn than the downturn state.
Subjects: 
public expenditure
impulse response
exchange rate volatility
South Africa
JEL: 
C32
E62
F31
F41
Persistent Identifier of the first edition: 
ISBN: 
978-92-9267-010-8
Document Type: 
Working Paper

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