n African Finance Journal - South African "rand" / U.S. "dollar" exchange rate variability, parity theories, and investment rules

Volume 10, Issue 2
  • ISSN : 1605-9786



Parity theories are used to study the "rand" / "dollar" rate. Interest rate parity results suggest that in about 20% to 26.7% of cases, investing in USA would have yielded higher interest returns than investing in South Africa. In 73.3% to 80% of cases, investing in South Africa would have yielded more interest returns. The PPP theory suggests rand undervaluation relative to the dollar, thereby justifying revaluation / appreciation in all cases, while the interest rate parity theory suggests rand undervaluation in 73.3% to 80% of cases and overvaluation in 20% to 26.7% of cases. Cointegration tests suggest significant (at 5% but not at 1%) long run PPP, which is consistent with the high correlation (0.97) between the two countries? price levels.

Loading full text...

Full text loading...


Article metrics loading...


This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error