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The impacts of public expenditure innovations on real exchange rate volatility in South Africa

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  • Naser Yenus Nuru
  • Hayelom Yrgaw Gereziher

Abstract

This study investigates the impacts of public expenditure innovations on exchange rate volatility in South Africa using quarterly data for the period 1970-2019. To achieve this objective, a version of the vector autoregressive impulse response model proposed by Jordà is employed and the innovations are identified recursively. The impulse response functions indicate that public expenditure innovation has a significant depreciating trend impact on exchange rate volatility, and its impact relies on the type of fiscal expenditure innovation.

Suggested Citation

  • Naser Yenus Nuru & Hayelom Yrgaw Gereziher, 2021. "The impacts of public expenditure innovations on real exchange rate volatility in South Africa," WIDER Working Paper Series wp-2021-72, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2021-72
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    Keywords

    Public expenditure; impulse response; Exchange rate; Volatility; South Africa; Structural VAR;
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