IDEAS home Printed from https://ideas.repec.org/a/ids/ijmefi/v14y2021i4p342-352.html
   My bibliography  Save this article

Modelling exchange rate movements in South Africa: an ARDL application

Author

Listed:
  • Paul-Francois Muzindutsi
  • Zama Zungu
  • Minenhle Khanyile
  • Thalente Dlamini
  • Andile Sithole
  • Adefemi A. Obalade

Abstract

This study examined the monetary, unbiased forward rate hypothesis (UFRH), and random walk models of exchange rate in South Africa using the auto regressive distributed lag (ARDL) approach. The estimated results show that there is a long-run relationship between variables in each model, suggesting the examined models are able to predict the exchange rate. In the long run, this paper found a sticky-price monetary model with correct signs but restrictions on money supply are violated. However, both the UFRH restrictions and random walk model were upheld. The models were then used to predict forecasts of the out-of-sample period as compared to the random walk. We found that UFRH outperformed other models. In this context, forward rate is predominantly an unbiased estimator of the future spot exchange rate, suggesting that the South African exchange rate market is efficient.

Suggested Citation

  • Paul-Francois Muzindutsi & Zama Zungu & Minenhle Khanyile & Thalente Dlamini & Andile Sithole & Adefemi A. Obalade, 2021. "Modelling exchange rate movements in South Africa: an ARDL application," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 14(4), pages 342-352.
    • Handle: RePEc:ids:ijmefi:v:14:y:2021:i:4:p:342-352
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=116978
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ids:ijmefi:v:14:y:2021:i:4:p:342-352. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Parker (email available below). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID=218 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.