Year: 2018
Type: article
Abstract: Purpose The purpose of this paper is to establish the empirical link between real exchange rate (RER) undervaluation and sectoral growth in South Africa between 1984 and 2014. Design/methodology/approach The study employs a dynamic panel data approach estimated by the system generalised method of moments technique in a bid to control for endogeneity. Findings The authors find a significant positive impact of undervaluation on sectoral growth which increases with capital accumulation. Also, the authors confirm that undervaluation promotes sectoral growth up to a point where further increases in undervaluation retards growth. Practical implications The results confirm the importance of policies that keep the domestic currency weaker to foster sectoral growth. Originality/value The originality of this paper lies in establishing the impact of exchange rate undervaluation on growth at a sector level in the context of South Africa using a dynamic panel data approach.
Authors: Brian Tavonga Mazorodze, Dev D. Tewari
Institution: University of Zululand
Language: English
Domain: Social Sciences
Open Access status: hybrid
OpenAlex ID: W2884942723