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Exchange rate volatility and agricultural trade under policy reforms in South Africa

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  • Joseph Kargbo

Abstract

Decades of government intervention have helped develop the South African agriculture sector to its present state. Policy reforms have included trade and exchange rate policies to increase the country's international competitiveness, reduce poverty and promote economic growth. These reforms are facilitating the growth in agricultural trade and South Africa's reintegration into the global economy. Annual agricultural exports and imports have increased. This paper uses annual data and a vector error-correction model to investigate the supply and demand relationships for agricultural trade flows in South Africa during the past four decades. The results show that prices, real exchange rates, domestic production capacity and real incomes have significant impacts on the country's agricultural trade. In particular, exchange rate volatility has negative impacts. This cannot be viewed solely as an exogenous source of macroeconomic instability in South Africa, as domestic policies play a crucial role in influencing the movement of exchange rates.

Suggested Citation

  • Joseph Kargbo, 2006. "Exchange rate volatility and agricultural trade under policy reforms in South Africa," Development Southern Africa, Taylor & Francis Journals, vol. 23(1), pages 147-170.
    • Handle: RePEc:taf:deveza:v:23:y:2006:i:1:p:147-170
    DOI: 10.1080/03768350600556315
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    References listed on IDEAS

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    1. International Monetary Fund, 1984. "The Exchange Rate System: Lessons of the Past and Options for the Future," IMF Occasional Papers 1984/003, International Monetary Fund.
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    Cited by:

    1. Wesley, J.D. & Shen, Xuan & Li, Sheng & Wilson, Norbert L.W., 2012. "Agricultural Trade Bias in Exchange Rate Volatility Effect Estimation: An Application of Meta-Regression Analysis," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124870, Agricultural and Applied Economics Association.
    2. O.A. Fadeyi & A.A. Ogundeji & B.J. Willemse, 2014. "Establishing the linkages between the South African agricultural trade balance and macroeconomic indicators," Agrekon, Taylor & Francis Journals, vol. 53(4), pages 92-105, November.
    3. Dimitrios Serenis & Paul Serenis, 2010. "Exchange Rate Volatility, the E.U. and Sectoral Exports: New Empirical Evidence from the Chemical Sector (1973-2005)," Research in World Economy, Research in World Economy, Sciedu Press, vol. 1(1), pages 47-55, November.
    4. J. Zivanomoyo & A. Mushunje & W.N. Bandura, 2022. "The effects of exchange rate volatility on trade performance in Southern African Development Community countries: Pooled mean group approach," Journal of Economic Policy and Management Issues, JEPMI, vol. 1(1), pages 12-20.

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