On the real exchange rate effects of higher electricity prices in South Africa

Abstract

The paper uses a static Computable General Equilibrium (CGE) model of South Africa and simulates various shocks to the price of electricity. We attempt different closures to the model and compare their respective effects on the Consumer Price Index. In a CGE model, this is measuring the real appreciation of the exchange rate, or international trade competitiveness. In general, we conclude that electricity prices per se does not significantly influence the real exchange rate, regardless of which closure is used.