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Identifying structural changes in the exchange rates of South Africa as a regime-switching process

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  • Katleho Makatjane
  • Roscoe van Wyk

Abstract

Exchange rate volatility is said to exemplify the economic health of a country. Exchange rate break points (known as structural breaks) have a momentous impact on the macroeconomy of a country. Nonetheless, this country study makes use of both unsupervised and supervised machine learning algorithms to classify structural changes as regime shifts in real exchange rates in South Africa. Weekly data for the period January 2003-June 2020 are used.

Suggested Citation

  • Katleho Makatjane & Roscoe van Wyk, 2020. "Identifying structural changes in the exchange rates of South Africa as a regime-switching process," WIDER Working Paper Series wp-2020-162, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2020-162
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    File URL: https://www.wider.unu.edu/sites/default/files/Publications/Working-paper/PDF/wp2020-162.pdf
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    References listed on IDEAS

    as
    1. Salisu, Afees A. & Fasanya, Ismail O., 2013. "Modelling oil price volatility with structural breaks," Energy Policy, Elsevier, vol. 52(C), pages 554-562.
    2. Chkili, Walid & Nguyen, Duc Khuong, 2014. "Exchange rate movements and stock market returns in a regime-switching environment: Evidence for BRICS countries," Research in International Business and Finance, Elsevier, vol. 31(C), pages 46-56.
    3. Andrew Phiri, 2020. "Structural changes in exchange rate-stock returns dynamics in South Africa: examining the role of crisis and new trading platform," Economic Change and Restructuring, Springer, vol. 53(1), pages 171-193, February.
    4. Seabelo T Nyawo & Roscoe Bertrum van Wyk, 2018. "The Impact of Policy Uncertainty on Macro-Economy of Developed and Developing Countries," Journal of Economics and Behavioral Studies, AMH International, vol. 10(1), pages 33-41.
    5. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
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    Cited by:

    1. Mathias Manguzvane & Mduduzi Biyase, 2023. "Exchange rate risk and sovereign debt risk in South Africa: A Regime Dependent Approach," Economics Working Papers edwrg-04-2023, College of Business and Economics, University of Johannesburg, South Africa, revised 2023.

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    More about this item

    Keywords

    Machine learning; Markov switching; Principal component analysis; South Africa;
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