The paper compares several methods a developing country can use to select a basket of currencies against which to peg its exchange rate, if the country's goal is to minimize variations in its real effective exchange rate. Data over the period 1973-1983 for Zaire, Zambia, Chile and Peru are used to compare the lowest variance exchange rate pegs that are obtained by: a) using different formulas to calculate the indexes of exchange rate variability, b) using different types of weights in the formulas (e.g., weighting bilateral exchange rate fluctuations by export, import or total trade), and c) calculating the indexes of exchange rate variation over different time periods within 1973-1983. / M.A.

In this thesis, I undertake an empirical search for the existence of price and exchange rate bubbles during the inter-war European hyperinflations of Germany, Hungary and Poland. Since the choice of an appropriate policy to control inflation depends upon the true nature of the underlying process generating the inflation, the existence or non-existence of inflationary bubbles has important policy implications. If bubbles do exist, positive action will be required to counter the public's self-fulfilling expectation of a price surge. Hyperinflationary episodes have been chosen as my case study because of the dominant role that such expectations play in price determination. In the literature, there are frequently expressed concerns about empirical research into bubbles. The existence of model misspecification and the nonlinear dynamics in the fundamentals under conditions of regime switching may lead to spurious conclusions concerning the existence of bubbles. Furthermore, some stochastic bubbles may display different collapsing properties and consequently appear to be linearly stationary. Thus, the evidence against the existence of bubbles may not be reliable. In my thesis, I attempt to tackle the above empirical problems of testing for the existence of bubbles using advances in testing procedures and methodologies. Since the number of bubble solutions is infinite in the rational expectations framework, I adopt indirect tests, rather than direct tests, for the empirical study. From the findings of my empirical research, the evidence for stationary specification errors and the nonlinearity of the data series cannot be rejected, but the evidence for the existence of price and exchange rate bubbles is rejected for all the countries under study. It leads to the conclusion that the control of the inter-war European hyperinflations was attributable to control of the fundamental processes, since the dynamics of prices and exchange rates for these countries might not be driven by self-fulfilling expectations.

This study examines the impact of exchange rate volatility and misalignment on economic growth in South Africa. It applies the Johansen co integration test and the vector error correction model on quarterly data for the period 1990:01-2010:04. Exchange rate volatility is measured as the standard deviation of both the nominal and nominal effective exchange rate. The study constructs three measures of exchange rate misalignment, with two of the measures constructed using the Producer Price Index and Consumer Price index based Purchasing Power Parity. The third measure was based on the difference between the nominal and effective exchange rate. Contrary to pre-dominant findings in the exchange rate literature, the study finds a positive and significant relationship between exchange rate volatility and economic growth and attributes it to composition of the country’s exports that are largely made up of commodities that act as essential inputs in many production processes. As a result, the variability of prices caused by exchange rate volatility is not expected to deter demand for these commodities. A negative and significant relationship between exchange rate misalignment and economic growth was found. The findings of the study show that it is important for monetary authorities to ensure that the exchange rate is always at an appropriate level in order to avoid the negative implications of exchange rate misalignment on economic growth.

No description available.

published_or_final_version / Business Administration / Master / Master of Business Administration

published_or_final_version / abstract / Economics and Finance / Doctoral / Doctor of Philosophy

published_or_final_version / Law / Master / Master of Laws

M.Com. / The objective of this study was to compose an effective exchange rate index for the motor- and related industries in Soutb Africa to be used for the forecasting of new motorcar prices. The situation in South Africa, where a lot of components used in the production of motorcars are imported, exposes the industry to exchange rate risk. The government introduced measures like Phase VI of the local content program and a 100 percent Ad Valorem import duty on new motorcars to protect local manufacturers. Although these measures limits exchange rate exposure, the motor industry is still affected by exchange rate changes. An effective exchange rate index was compiled by allocating weights to a currency index according to it's contnbution to imports by the local motor industry. The private consumer of motorcars can use the index to determine when he must purchase a new vehicle to avoid price increases. Corporate consumers of motor vehicles can use the index to help with the management of their vehicle fleet. The index can also be used by motorcar manufacturers and importers of components to manage their exchange rate risk. Individual motorcar manufacturers can test the effectiveness of their strategies to manage exchange rate risk by comparing it to the index as the effective exchange rate index was compiled for the industry as a whole. The exposure of a manufacturer with an effective strategy will be less than that of the index. A manufacturer will have to look at alternative strategies to managing exchange rate risk if his exposure to exchange rate risk is greater than that of the index. Regression analysis was used with the exchange rate index as the independent variable to forecast prices of new motorcars. A high degree of correlation was found when the forecasted prices were compared with the actual prices of new motorcars. The conclusion was reached that the effective exchange rate index could be of great value to the private- and corporate consumer of new motor vehicles as well as manufacturers of motorcars and importers of components.

M.A. / Financial markets are rapidly integrating into a single global market place, and developing countries including South Africa, are increasingly part of this process. The process is being driven by both the push and the pull factors in both developed and developing countries. Nevertheless, the overwhelming majority of the developing countries still need to create the conditions to attract long-term capital flows. Although South Africa has been attracting capital flows since the 1990s, the level is not sustainable because it mainly attracts shortterm capital. It has failed to attract long-term capital on a sustainable basis because of economic and political crises facing the country. Thus, the South African government needs to build the kind of macroeconomic, regulatory and institutional environment that channels this private capital into broad - based and sustainable growth.

Masters of Management in Finance and Investments, University of the Witwatersrand Johannesburg, 2016 / Financial economists have spent a considerable amount of time trying to understand the impact of macroeconomic news announcements on exchange rates, more so evaluating how new information is incorporated into exchange rates. This study examines the impact of macroeconomic news announcements on exchange rate volatility. Unlike most studies that utilise developed market currency pairs, this study utilises high frequency USD/ZAR data. Macroeconomic news can affect exchange rates directly and indirectly through public and private information. However, this study only focuses on scheduled macroeconomic news announcements as they usually have market forecasts available to conduct analysis regarding the asymmetric news effects. The following asymmetries are evaluated into the study: news items by geographical location, no-news vs. surprise news announcements and positive vs. negative news announcements. We make the following findings in our empirical study: (i) After the release of a news announcement, the level of foreign exchange volatility rises. This event is independent of whether the news item surprised the market or not. (ii) We find that both South African and US news items significantly impact USD/ZAR volatility, suggesting that both US and South African news items are being used to formulate investor expectations regarding the future prospects of the currency pair. (iii) Negative news appears to have a greater impact on exchange rate volatility relative to positive news. This result is also state dependent, as investors tend to behave differently to news depending on the economic climate at that point in time. Investor cognitive biases also give rise to the asymmetric news effects on exchange rate volatility. Investors do not always act in rational manner, especially when faced with multiple news items that are contradictory to each other. / XL2018