n African Finance Journal - Real exchange rate volatility and foreign trade : evidence from South Africa's exports to the United States

Volume 5, Issue 2
  • ISSN : 1605-9786



This paper uses the autoregressive conditional heteroscedastic (ARCH) and general ARCH (GARCH) models to investigate the impact of the real exchange rate volatility on South Africa's export to its largest, single-nation trading partner - the United States (U.S). The results indicate that volatility of the Rand's real exchange rate exerts a significant and negative effect on exports in both the long and short-run while decline in real exchange rates has a positive impact on exporting activity. Therefore, stable competitive exchange rate and sound macroeconomic fundamentals that enhance international competitiveness are necessary to ensure greater market penetration of South Africa's export.

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