THE EFFECT OF ECONOMIC GROWTH AND EXCHANGE RATE ON IMPORTS AND EXPORTS: THE SOUTH AFRICAN POST-2008 FINANCIAL CRISIS CASE

Yıl 2020, , 223 - 238, 30.06.2020

Thomas Habanabakize

https://doi.org/10.34109/ijefs.202012114

Cited By: 9

Öz

Imports and exports play a vital role in every country’s economy. Both of these variables depend to a great extent either on the appreciation or depreciation of the country’s currency. Imports, exports and exchange rate are some of main determinants of economic growth and are also affected by economic growth. This paper aims to determine the effect of exchange rate and economic growth on both exports and imports in the South African economy. To achieve this objective, a test for cointegration was carried out using the autoregressive distributed lag (ARDL) model. This model was applied on a time series quarterly data from 2008 to 2018. The error correction model and Granger Causality tests were performed to define the short-run and causal relationship amongst variables. The regression analyses reveals the existence of a long-run relationship within the estimated variables. In support of the economic literature, the study findings indicated that economic growth positively effects on both exports and imports. Nonetheless, the analysis depicted that in the long-run, Rand appreciation leads to more imports and fewer exports. Furthermore, the Granger Causality text suggested a bidirectional causality between the exchange rate and imports; between economic growth and imports, and between the exchange rate and economic growth. Succinctly, the used variables have a causal relationship with one another. Based on the findings, the study highlighted the pertinence of economic growth and emphasised the role played by the exchange rate in maintaining the balance between imports and exports. The study recommended that both currency value and economic growth should be given urgent attention in order to revive the deteriorating economy of South Africa.

Anahtar Kelimeler

imports and exports, ARDL, GDP, exchange rate, South Africa

Kaynakça

• Alemu, A.M. & Jin-sang, L. (2014). Examining the Effects of Currency Depreciation on Trade Balance in Selected Asian Economies. International Journal of Global Business, 7(1), 59-76.
• Alexander, S.S. (1952). Effects of a Devaluation on a Trade Balance. IMF staff papers, 2(2), 263.
• Aliyu, S.R.U. (2011). Impact of oil price shock and exchange rates volatility on economic growth in Nigeria: An Empirical Investigation. Research Journal of International Studies, 11(3), 103 – 120.
• Appleyard, D.R., Field Jr, A.J. & Cobb, S.L. (2010). Economía internacional, Madrid, McGraw-Hill.
• Auboin, M & Ruta, M. (2011). The relationship between exchange rates and international trade: a review of economic literature. World Trade Organization, Staff Working Paper, ERSD-2011-17. World Trade Organization.
• Angelopulo, G. (2017). A Competitive Assessment of South Africa's Leading Cities-National, Continental and Global Perspectives. Strategic Review for Southern Africa, 39(1), 65 - 92.
• Bakari, S. & Mabrouki, M. (2017). Impact of exports and imports on economic growth: new evidence from Panama. Journal of Smart Economic Growth, 2(1), 67-79.
• Chandra, R. & Love,J (2005). Testing export-led growth in Bangladesh in a multivariate VAR framework. Journal of Asian Economics, 15(6), 1155-1168
• ECA (2019). Fiscal Policy for Financing Sustainable Development in Africa: South Africa Country Case Study for ERA 2019. Addis Ababa, Ethiopia: ECA.
• Hassan, S. & Murtala,M. 2016. Market size and export-led growth hypotheses: New evidence from Malaysia. International Journal of Economics and Financial Issues, 6(3), 971-977
• Hussain, M. (2014). Export and GDP in Pakistan: Evidence from Causality and Cointegration Analysis. International Journal of Management Cases, 16, 37-46.
• Jarita, D. (2008). Impact of Exchange rates shocks on prices of imports and exports in Malaysia. MPRA Paper No.11624.
• Jordan, A. C. & Eita, J, H. (2007). Export and economic growth in Namibia: A granger causality analysis. South African Journal of Economics 75 (3), 540-547.
• Kónya, L. (2006). Exports and growth: Granger causality analysis on OECD countries with a panel data approach. Economic Modelling, 23(6), 978-992.
• Kumari, D. & Malhotra, N. (2014). Export-led growth in India: Cointegration and causality analysis. Journal of Economic and Development Studies, 2(2), 297-310.
• Lin, J.Y. and Li, Y. (2003). Export and economic growth in China: a demand-oriented analysis. China Economic Quarterly, 2, 779-794.
• Mehta, N.S. (2015). The dynamics of relationship between exports, imports and economic growth in India. International Journal of Research in Humanities & Social Sciences, 3(7), 39-47.
• Muhammad, Z. (2014). Macroeconomic Relationships between Exchange Rate Instability, Exchange Volatility, Trade and Economic Growth Variables: The case of Pakistan. Journal of Economics and Sustainable Development, 5(13).
• Neath, A. A. & Cavanaugh, J. E. (1997). Regression and time series model selection using variants of the Schwarz information criterion. Communications in Statistics-Theory and Methods, 26(3):559-580.
• Pesaran, M.H., Shin, Y. & Smith, R.J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326.
• Rangasamy, L. (2009). Exports and economic growth: The case of South Africa. Journal of International Development, 21(5), 603-617.
• Sulaiman, M. & Saad, N.M. (2009). An analysis of export performance and economic growth of Malaysia using co-integraton and error correction models. The Journal of Developing Areas, 34(1), 217-231.
• Thirunavukkarasu, V. & Achchuthan, S. (2014). Export, import and economic growth: Evidence from Sri Lanka. Journal of Economics and Sustainable Development, 4(9), 147-155.
• United Nations (2019). Fiscal policy for financing sustainable development in Africa: economic report on Africa. https://www.uneca.org/sites/default/files/PublicationFiles/era2019_eng_fin.pdf Date of access 01 Jul. 19.
• Vijayasri, G. V. (2013). The importance of international trade in the world. International Journal of Marketing, Financial Services & Management Research, 2(9): 111-119.