Thesis (Ph. D.)--Ohio State University, 1985. / Includes vita. Includes bibliographical references (leaves 78-81). Available online via OhioLINK's ETD Center.

D.Com. (Economics) / The objective of the study was mainly to examine the effect of the U.S. dollar on the competitive advantage of South Africa.The theoretical framework explaining the competitive position of a country in the global market place was examined in Chapter II. The complexity of the variables involved is evident from the many different points of view put forward by economists, not only in respect of the. concept competitive advantage of a country, but also in respect of the criteria that should be used to evaluate such competitiveness. It is, however, evident that the phenomena involved in evaluating the competitive position of a country cannot be separated from the theories explaining the flow of goods and services between countries. Only a minor part of such flows can be explained in terms of the traditional international trade theories. Most of the trade over borders occurs between countries differing very little from each other as far as tastes and factor ...

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Exchange rates are believed to be one of the major driving forces behind sustainable macroeconomic growth and it is therefore important to ensure that they are at an appropriate level. Exchange rate misalignment is a situation where the actual exchange rate differs significantly from its equilibrium value, resulting in either an overvalued or an undervalued currency. The problem with an undervalued currency is that it will increase the domestic price of tradable goods whereas an overvalued currency will cause a fall in the domestic prices of the tradable goods. Persistent exchange rate misalignment is thus expected to result in severe macroeconomic instability. The aim of this study is to estimate the equilibrium real exchange rate for both Ghana and Nigeria. After so doing, the equilibrium real exchange rate is compared to the actual real exchange rate, in order to assess the extent of real exchange rate misalignment in both countries, if any such exists. In order test the applicability of the equilibrium exchange rate models, the study draws from the simple monetary model as well as the Edwards (1989) and Montiel (1999) models. These models postulate that the variables which determine the real exchange rate are the terms of trade, trade restrictions, domestic interest rates, foreign aid inflow, income, money supply, world inflation, government consumption expenditure, world interest rates, capital controls and technological progress. Due to data limitations in Ghana and in Nigeria, not all the variables are utilised in the study. The study uses the Johansen (1995) model as well as the Vector Error Correction Model (VECM) to estimate the long- and the short-run relationships between the above-mentioned determinants and the real exchange rate. Thereafter the study employs the Hodrick-Prescott filter to estimate the permanent equilibrium exchange rate. The study estimates a real exchange rate model each for Ghana and Nigeria. Both the exchange rate models for Ghana and Nigeria provide evidence of exchange rate misalignment. The model for Ghana shows that from the first quarter of 1980 to the last quarter of 1983 the real exchange rate was overvalued; thereafter the exchange rate moved close to its equilibrium value and was generally undervalued with few and short-lived episodes of overvaluation. In regard to real exchange rate misalignment in Nigeria prior to the Structural Adjustment Program in 1986 there were episodes of undervaluation from the first quarter of 1980 to the first quarter of 1984 and overvaluation from the second quarter of 1984 to the third quarter of 1986; thereafter the exchange rate was generally and marginally undervalued.

The three chapters of this thesis address two questions. First, how are real and nominal exchange rates between different national currencies determined? Second, how does this determination influ- ence the international transmission of macroeconomic fluctuations and, especially, monetary policy disturbances? Chapter 1 comprises an empirical evaluation of long-run purchasing power parity as a theory of equilibrium nominal exchange rate determination for the post-Bretton Woods data. Structural time series methods are used to identify bivariate moving average representations of nominal exchange rates and relative goods prices and to test whether these empirical representations are consistent with the implications of purchasing power parity. Long-run purchasing power parity can be un ambiguously rejected for the G- 7 countries. There are permanent deviations from parity which account for almost all of the variance of real exchange rates, and which are driven by permanent disturbances to nominal rates which are never reflected in relative goods prices. Chapter 2 presents an empirical evaluation of the hypothesis that the global Depression of the 1930’s was attributable to international transmission of (idiosyncratic) U.S. monetary policy actions through the International Gold Exchange Standard - fixed exchange rate - regime. Specifically, the analysis evaluates whether the interwar output collapse in Canada was caused by transmitted U.S. monetary policy disturbances. A multivariate structural time series representation of the Cana dian macroeconomy is estimated which is consistent with the dynamic and long-run equilibrium properties of a Mundell- Fleming small open economy model and in which U.S. data represent the ‘rest of the world’. The empirical results show that U.S. monetary disturbances play a negligible role for both Canadian and U.S. output movements in the 1930’s. Permanent common real shocks to outputs can account for the onset, depth and duration of the Depression in both economies. There is little evidence to support a Gold-Standard transmitted global output collapse through the transmission mechanisms usually associated with purchasing power parity theories of real exchange rate determination. Chapter 3 develops an alternative theory of real and nominal exchange rate determination and of the international transmision mechanism which can account for many stylized facts regarding the empirical behaviour of real and nominal exchange rates that long-run purchasing power parity fails to explain. In a two-country, two-currency overlapping generations model, the role of optimal portfolio choices between internationally traded assets is emphasized - rather than goods market trade - as the source of currency demands. These demands, and supplied of assets generated by domestic monetary policies, determine both real and nominal exchange rates. Here, monetary policy changes can induce permanent international and intra-national reallocations through real exchange rate and real interest rate adjustments. This transmission mechanism differs markedly from that implied by purchasing power parity. / Business, Sauder School of / Graduate

This thesis examines the link between exchange rate and unemployment. The unemployment problem in an open economy has mostly been discussed at the micro level. Previous studies focus on job losses from trade by the manufacturing industries. However, the macro level relationship between exchange rate and unemployment has been largely ignored. The aims of this study are twofold. Firstly, a simple theoretical relationship between exchange rate and unemployment is established by the PPP and Phillips curve. The model shows that, under the linked exchange rate system, the unemployment in currency-linked country is a function of the unemployment in the base country, the changes in the exchange rate, the rate of price change differential between the two countries, and the natural rate of unemployment differential between the two countries. By using Hong Kong data, we find that one percent increase in the U.S. unemployment rate transmits 0.53 percent increase in Hong Kong. Under the floating system, we analyze this problem in the United Kingdom, Germany, and France, which predominantly represent Europe. We investigate the magnitude of the transmitted unemployment and the exchange rate impact among those countries before and after the new currency. We find that the transmission effects are significant, which partially explain the severity of this long-lasting problem. To shed new light, we construct a three-sector model comprising goods market, labor market, and money market. We postulate that domestic product market faces import competition. Thus the exchange rate comes into play, intrinsically affecting the labor demand. In the meantime, we extend the standard money demand function by including both the domestic and foreign money balances. We believe that this extension better reflects the reality. We then solve the general equilibrium model to get the reduced-form solution with our focus on the relationship between exchange rate and employment. We find that the exchange rate effect is unconditional in that home currency depreciation benefits employment and alleviates the unemployment problem.

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Includes bibliographical references / This thesis addresses exchange rate behaviour in a de-facto partially dollarized economy. Over the past two decades the Tanzanian Shilling has been increasingly displaced by the United States dollar. This change has been prompted by instability of the local currency, and by the practices of foreign firms, which have used a dual pricing system at rates disadvantageous to the local currency. The implications of Tanzania's dollarization are traced through three related investigations: whether theTanzania Shilling to United States Dollar exchange rate overshoots, whether it has impacted the monetary transmission mechanism, and whether dollarization has substantively affected the pattern of Tanzania's foreign trade. The first study uses the Structural Vector Autoregression to test if the overshooting hypothesis holds for the TZS-USD exchange rate.The results suggest that foreign currency deposits are encouraged by the volatility of the exchange rate.In addition it is noted that the exchange rate demonstrates delayed overshooting, while a contractionary monetary policy leads to appreciation in the exchange rate for at least a year before returning to equilibrium. The determinants of the exchange rate in Tanzania are trade openness, real interest differentials, labour productivity and government expenditure. The second study uses a Bayesian Vector Autoregression to investigate the monetary transmission mechanism in the presence of dollarization. The results indicate that positive shocks on the interest rate contract money supply, which leads to lower output growth and inflation, while the exchange rate appreciates. The degree of dollarization also has a negative impact on the monetary supply of the local currency, as the central bank seeks to maintain a relatively constant rate of total money supply. This has the effect of lowering the inflation and interest rates, and is also associated with further depreciation of the exchange rate. The positive shock on the exchange rate (depreciation) is associated with an increase in dollarization.The aggregate demand shock fuels inflation and, in Tanzania's case, it has increased money supply, due to the persistent demand for real monetary balances. The third study uses a Dynamic Stochastic General Equilibrium to describe the conduct of monetary policy in a small, open, and partially dollarized Tanzanian economy. The structure of the model incorporates the expectations of agents and the dynamic relationships are explained in terms of structural representations that characterize the behaviour of the firm, household and central bank. The parameters in the model are estimated with Bayesian techniques, after it has been applied to Tanzanian data. The effects of individual shocks, including those that may be used to describe the conduct of monetary policy, are then considered. These simulations suggest that despite the existence of partial dollarization in the Tanzanian economy, monetary policy has important, short-term, real effects. The fourth study uses an Autoregressive Distributed Lag approach to investigate the short and long run exchange rate sensitivity of foreign trade. Principal components analysis is also used to reduce the dimension of the dataset. It finds evidence that the depreciation of the Shilling typically has an immediate positive impact on the trade balance, and exchange rate depreciation increases the trade balance in both the short and long run. However, exports show signs that support the J-curve hypothesis, though the associated parameters are not significant. Imports are not reduced by a rise in the Shilling, as traditional theory would suggest. This is ascribed to the country's de-facto partial dollarization. Since over 40 per cent of money supply arecurrently held in dollar denominated accounts, trade is largely immune to domestic currency fluctuations. This study also notesthat the use of foreign currency has tended to rise during periods of substantial economic growth. Although no causality is argued, this does suggest that the parallel use of foreign and domestic currencies is not detrimental to Tanzania's economic growth.

Section 24J is regarded to be one of the most complex provisions in the Income Tax Act No. 58 of 1962. This study specifically focuses on the income tax treatment of section 24Jinstruments denominated in a foreign currency, specifically with regards to whether such instruments are fixed or variable rate instruments for purposes of section 24J and the interaction between section 24J, section 25D (foreign currency translation rules) and section 24I (gains and losses on foreign exchange transactions).The basic concepts surrounding the incurral and accrual of interest for income tax purposes, as well as of some of the general issues faced when section 24J is practically applied are discussed. Importantly it is found that although the definition of 'instrument' includes all debt instruments, regardless of whether such instruments are interest-bearing, the application of section 24J would have no impact on the issuer or holder of an instrument that is a non-interest bearing debt instrument. Also, the section 24J definition of 'interest' is wider than the common law meaning of the same term. However, as 'interest'is defined with reference to itself, the common law meaning is still very relevant. It is confirmed that section 24J poses various interpretational uncertainties which are especially highlighted when some of the key provisions of section 24J are applied in determining the interest accrual amounts based on the yield to maturity method. Applying the rules of statutory interpretation and with the aid of hypothetical examples, itis argued that foreign exchange rates would fall within the definition of a variable rate for purposes of section 24J. However, an instrument denominated in a foreign currency would be regarded as a fixed rate instrument to the extent that the amounts payable are fixed amounts specified in the applicable foreign currency or the calculation of the amount payable in the applicable foreign currency does not involve the application of a 'variable rate' (as defined).Further is it argued that section 24J merely provides for a single accrual or incurral event during each year of assessment in relation to each instrument. Therefore, where accrual amounts be denominated in a foreign currency it should be translated at the spot rate on the last day of the year of assessment (or on the date of redemption/transfer in the instance where the instrument was transferred/redeemed during the year of assessment) for purposes of determining the sum of the accrual amounts to be included in taxable income. It is also argued that the timing of the accrual and incurral of interest amounts in terms of section 24J is applied in establishing the 'transaction date' of the interest amount owing for purposes of determining 'exchange differences' at the end of any year of assessment in terms of section 24I.

Bibliography: pages 53-56. / The main objective of this paper is to discuss exchange rate policies in Botswana from 1976 to 1994. It is also an attempt to find out how Botswana has responded to exogenous shocks and whether such responses could be used in the future when shocks recur. The paper contends that Botswana's record in responding to shocks has been impressive. This is not to say that previous policy actions in response to shocks would be adequate when shocks occur again. Experience shows that it is difficult to respond to exogenous shocks when they take time to subside.