The Impact of Monetary and Commodity Fundamentals, Macro News and Central Bank Communication on the Exchange Rate: Evidence from South Africa
Organization for Economic Co-Operation and Development (OECD); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Université Paris X Nanterre - Department of Economics; William Davidson Institute
CESifo Working Paper Series No. 2612
This paper studies drivers of high-frequency (daily) dynamics of the South African rand vis-à-vis the dollar from January 2001 to July 2007. We find strong nonlinear effects of commodity prices, perceived country and emerging market risk premium and changes in the dollar-euro exchange rate on changes in daily returns of the rand-dollar exchange rate. We also identify a one-sided nonlinear mean reversion to the long-term monetary equilibrium. In addition we establish very short-lived effects on the exchange rate of selected macroeconomic surprises and central bank communication aimed at talking up the rand.
Number of Pages in PDF File: 26
Keywords: exchange rate, nonlinearity, commodity prices, monetary model, macroeconomic news, central bank communication, South Africa
JEL Classification: E31, F31, O11, P17working papers series
Date posted: April 20, 2009
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