An econometric model of rand-US dollar nominal exchange rate
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Date
Authors
Sichei, Moses Muse
Gebreselasie, Tewodros G.
Akanbi, Olusegun Ayodele
Journal Title
Journal ISSN
Volume Title
Publisher
University of Pretoria, Department of Economics
Abstract
Modeling the nominal exchange rate has been one of the most difficult exercises in
economics. This paper attempts to estimate the nominal rand-USD exchange rate under the
Dornbusch(1980) and Frankel (1979) overshooting model using the Johansen cointegration
technique. The overshooting model fits the data well and that commodity prices are sticky in
South Africa. Thus any monetary policy strategy to strengthen or weaken the rand by means
of raising or cutting interest rate does the opposite in the short-run.
Description
Keywords
Exchange rate, Overshooting model, Vector error correction model (VECM)
Sustainable Development Goals
Citation
Sichei, MM, Gebreselasie, TG & Akanbi, OA 2005, 'An econometric model of rand-US dollar nominal exchange rate', University of Pretoria, Department of Economics, Working paper series, no. 2005-14. [http://web.up.ac.za/default.asp?ipkCategoryID=736&sub=1&parentid=677&subid=729&ipklookid=3]