A Thesis submitted to the Faculty of Commerce of the University of the Witwatersrand, Johannesburg, for the degree of Doctor of Philosophy December 1978 / The breakdown of the system of fixed exchange rates, which occurred in the western world in the early 1970s, has exerted marked effects upon the exchange rate policies adopted by South Africa. In particular, it has resulted in the local monetary authorities practising a more active policy concerning the exchange rate value of the rand. The purpose of this thesis is to describe and analyze the exchange rate policies of the Renublic during the period from 1971 to 1977, and to offer recommendations For change. The research procedure followed involved extensive gathering of information from published literature, together with confidential information disclosed to the writer by the Deputy Governor of the Reserve Bank. The thesis is divided into four sections. Section A reviews the traditional exchange rate policy adopted by the South African authorities, and their long-standing support for fixed but adjustable exchange rates in the international monetary system. Section B incorporates on historical review and analysis of changes in the exchange rate for the rand which have materialised since 1971. Section C focuses attention upon the attitudes of the local authorities over the issue of reform of the exchange rate regime in the international monetary system in the past few years. Section D is devoted to an analysis of specific policy issues which have arisen in the conduct of exchange rate policy in South Africa, and highlights areas where improvements could be made. All four chapters in this Section were submitted as evidence to the current Commission of Inquiry into the Monetary System and Monetary Policy in South Africa. One important conclusion of the study is that the more flexible exchange rate policy adopted in South Africa has had very limited success in affecting positively the current account of the balance of payments. Conversely exchange rate policy appears to have been more successful in improving the position on tht capital account. (iv) Another conclusion concerns deficiencies which exist in the provision of foreign exchange facilities, and particularly in regard to forward exchange. In some respects South African policy is characterized by exchange rates and facilities which bear little relation to market conditions. It is recommended that j mor># competitive market in foreign exchange should be established in both spot and forward transactions.

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 ...

Thesis (Ph.D. (Economics))--University of the Witwatersrand, Faculty of Commerce, Law and Management, School of Economic & Business Sciences, 2016. / The objective of this thesis is to investigate the recent historical dynamics of the four major nominal bilateral spot foreign exchange rates and the fifteen currency-basket nominal effective exchange rate of the South African rand (hereafter referred to as the rand). The thesis has been organised as three separate studies that add to the advancement of the knowledge of the characteristics and behaviour (causal effects) of the rand. The common thread that holds the individual chapters together is the study of the dynamics of the rand. In particular, the study establishes whether the apparent nonstationarity of the exchange rate is a product of unit root test misspecification (a failure to account for structural change), considers the connexions between the timing of the identified structural shifts and important economic and noneconomic events, and analyses rand volatility and the temporal effect of monetary policy surprises on both the spot foreign exchange market returns and volatility of the rand. In order to do this, low- and high-frequency data are employed. With regard to exchange rate modelling, the theoretical economic-exchange rate frameworks are approached both from the traditional macro-based view of exchange rate determination and a micro-based perspective. The various methodologies applied here tackle different aspects of the exchange rate dynamics. To preview the results, we find that adjusting for structural shifts in the unit root tests does not render any of the exchange rates stationary. However, the results show a remarkable fall in the estimates of volatility persistence when structural breaks are integrated into the autoregressive conditional heteroskedasticity (ARCH) framework. The empirical results also shed light on the impact of modelling exchange rates as long memory processes, the extent of asymmetric responses to ‘good news’ and ‘bad news’, the consistencies and contrasts in the five exchange rate series’ volatility dynamics, and the timing and likely triggers of volatility regime switching. Additionally, there are convincing links between the timing of structural changes and important economic (and noneconomic) events, and commonality in the structural breaks detected in the levels and volatility of the rand. We also find statistically and economically significant high-frequency exchange rate returns and volatility responses to domestic interest rate surprises. Furthermore, the rapid response of the rand to monetary policy surprises suggests a relatively high degree of market efficiency (from a mechanical perspective) in processing this information. Keywords: Exchange rate, expectations, long memory, monetary policy surprises, repo rate, structural breaks, volatility; unit root. JEL Code: C22, E52, E58, F31, F41, G14 and G15

<p>This paper tested the purchasing power parity hypothesis for Botswana and South Africa using cointegration analysis. The data used are the spot exchange rate between the two countries (rand and pula) and their consumer price indices.</p>

Thesis (M.M. (Finance & Investment)--University of the Witwatersrand, Faculty of Commerce, Law and Management, Wits Business School, 2017 / This paper provides an empirical analysis of the effect of commodity price volatility on the volatility of the South African exchange rate and subsequently the returns on the equity of commodity producing firms listed on the JSE. GARCH and VAR models evaluate South African exchange rate and stock market data between the years 1995 and 2015. Results show that there exists a spill over and bidirectional relationships between the equity returns volatility and the volatility of the exchange rate. Findings also indicated that international commodity price shocks transmitted into the South African Rand. / MT2017

Research paper for the degree of Master of Management in Finance & Investment / With a globalised system, the credit crunch of 2007/2008 rippled through the global economy quickly and turned a global financial crisis into a global economic crisis, vulnerabilities in the economy surfaced when it hit and these still continue to plague South Africa today. According to the World Bank, South Africa’s real GDP growth estimates are 0.8% in 2016/2017 and 1.1% in 2017/2018. Increasing uncertainty in global financial markets and banking systems, sharp declines in commodity prices, subdued global trade, currency pressure, as well as domestic constraints such as a current account deficit, a negative inflation outlook and high levels of unemployment, lead to increased financial stress in South Africa making the country more vulnerable in the event of an adverse scenario. Clearly, being cognizant of determinants of financial stress in South Africa is of paramount importance to policy makers as it allows them to assess potential risks to financial system stability and to consider timely and appropriate counteractions while maintaining a financial system that is resilient to systemic shocks. (South African Reserve Bank Financial Stability Review, 2016) This study aims to construct a financial stress index using Principal Component Analysis to identify key determinants of financial stress in South Africa. Several variables that have been identified in standing literature as being able to capture certain symptoms of financial strain in emerging market economies are estimated then aggregated into an index using the principal component analysis method. The usefulness of the index in identifying past crises is then assessed, moreover its performance is contrasted against the financial stress index constructed by South African Reserve Bank as well as against a South African composite business cycle leading indicator. Finally, the ability of the index to predict economic activity is examined. / MT2017

RESEARCH THESIS SUBMITTED TO THE FACULTY OF COMMERCE, LAW & MANAGEMENT IN PARTIAL FULLFILMENT OF THE REQUIREMENTS OF THE MASTER OF MANAGEMENT IN FINANCE & INVESTMENTS DEGREE UNIVERSITY OF THE WITWATERSRAND JOHANNESBURG February, 2016 / In this study we examine the relationship between international oil prices and the South African Rand/US Dollar exchange rate. We also determine the direction of causality between these two variables. We further ascertain the magnitude of the influence of oil prices to the exchange rate compared to other theoretically driven macroeconomic variables. A forecasting exercise is also undertaken to determine whether oil prices contain information about future Rand/Dollar exchange rate. Drawing from the works of Aliyu (2009) and Jin (2008) we use VAR based cointegration technique and vector error correction model (VECM) for the long run and short run analysis respectively. The results show that there is a unidirectional causality running from oil prices to exchange rate and not the other way round. We also find that a 1% permanent increase in oil prices results in 0.17% appreciation of the Rand against the US Dollar; a 1% permanent increase in money aggregates results in 21.3% depreciation of the Rand and a 1% increase in business cycles results in 0.29% depreciation of the Rand in the long run. A 1% increase in inflation and interest rates is found to result in a 0.09% and 0.005% depreciation on the Rand respectively. Our short run analysis indicates that 4.4% of the Rand/Dollar exchange rate disequilibrium can be corrected within a month. Oil prices are found to contain some information about the future Rand/US Dollar exchange rate when the VAR model is used for forecasting. This study has shown there is a causal relationship between oil prices and the strength of the Rand against the Dollar and, therefore, recommends diversification of the economy and more use of green energy. Strategies to reduce capital flight and trade-related capital is also recommended by this study. Key Words: Exchange rate, Oil price, forecasting, vector autoregressive (VAR) model, cointegration, vector error correction model (VECM), causality / MT2016

This study empirically investigates the relationship between fiscal deficit, inflation, M3 money supply and the exchange rate in South Africa. The study makes use of quarterly macroeconomic time-series data sets comprising 84 observations, covering the period from 1994Q1 to 2015Q4. The unit root tests conducted employed the Augmented Dickey Fuller (ADF) and Phillips-Perron (PP) tests. The results reveal that the variables become stationary at first difference. The Johansen co-integration technique suggests that there is at least one co-integrating equation among the variables. The results of the Engle-Granger approach, which is residual based, show that the residuals are stationary, thus validating the existence of a long-run relationship between the model variables. The study carried out a Granger causality test. The results indicate that there is a strong Granger causal relationship between the variables (IF) and (FD). Another strong causal relationship emerges between inflation and money supply. The ECM model was employed to identify the speed of adjustment as a response to the departures from the long-run equilibrium path. The estimated coefficient of the ECM error term has the required sign and is statistically significant at the five per cent level of significance. The error term indicates a quick convergence to equilibrium. The study concludes that the dependent variable (FD) is jointly caused by all the independent variables in the long-run. The results of the variance decomposition of the variable (FD) to innovations resulting from IF, MS and RER indicate that own shocks remain the dominant source of total fluctuations in the forecast error of the variables. The findings of the study are efficient and reliable as the estimated model passed all the major diagnostic tests. By implication the findings suggest that the estimated model show high goodness of fit and is thus reliable for policy making. The study recommends a fiscal adjustment that will enhance economic growth. Additionally, a fiscal policy that will aim at identifying and mitigating other possible leakages that narrow the tax base should be considered.

The foreign exchange market plays an important role in global finance, as it is considered to be among the largest financial markets in the world because of the significant amount of money involved in the foreign exchange market's transactions. Economic theories show that the exchange rate market may interact with the stock market index, but empirical studies on the interaction between the exchange rate market and the stock market index produced mixed results. Thus there is no empirical agreement regarding the interactions between the stock prices and exchange rate. This study examined the interaction between the real exchange rate and the stock market index in South Africa, with the aim of identifying the effect of exchange rate shocks on the Johannesburg Stock Exchange (JSE). It establishes the direction of causality between the stock market index and the real exchange rate; identifies the long-run and short-run relationships between the South African stock market and the exchange rate and determines the response of the South African stock market to different exchange rate regimes from 1978 to 2008. This study used different econometrics models, including descriptive statistics analysis, Engle-Granger cointegration approach, Error Correction Model and a Granger-Causality test. Variables used in this study include the real values of the JSE all share index and the real exchange rate series (the Rand/U.S. dollar exchange rate) from January 1978 to December 2008. The stock market index responded to changes in exchange rate regimes. Although the response tended to be slightly stronger during the period of the free floating exchange rate, correlation coefficients were insignificant in both fixed and flexible exchange rate regimes. A negative long-run relationship between the real exchange rate and the stock market index was found. The short-run results established that changes in the real exchange rate have no impact on the real stock market index. Granger-Causality tests indicated that there is a bidirectional causal relationship between the South African stock market index and the Rand/U.S. dollar exchange rate. / Thesis (M.Com.)-University of KwaZulu-Natal, Pietermaritzburg, 2011.

<p>This paper tested the purchasing power parity hypothesis for Botswana and South Africa using cointegration analysis. The data used are the spot exchange rate between the two countries (rand and pula) and their consumer price indices.</p>