EFFECTS OF TERMS OF TRADE SHOCK ON SELECTED MACROECONOMIC VARIABLES IN SOUTH AFRICA

2019-07-20 05:04:11 Viewed: 120 Downloads: 5
  • EFFECTS OF TERMS OF TRADE SHOCK ON SELECTED MACROECONOMIC VARIABLES IN SOUTH AFRICA

     

     Publisher:

    Pub: 2019-07-20 05:04:11

    Email it to me(Requires login) Download this PDF file
  • Abstract

    Understanding the terms of trade is essential as its worsening can cause severe disruption in any economy. In the case of South Africa, as a developing nation and a net importer, coupled with the fact that its share of exports in the global market is very low, it is not spared in the effects of the volatility in export prices. It is therefore important to observe the effects of a negative shock in the terms of trade on selected key macroeconomic variables; output growth, exchange rate, inflation rate, trade balance and investment growth. Using annual data over the period 1980 to 2017, the study adopted Monte Carlo impulse response function and variance decomposition analyses to examine the path of a given variable, as a result of a negative shock in the terms of trade variable. The results obtained show that all the variables responded to the shock in the terms of trade as expected, while some reverted to the initial starting point at the end of the tenth year. The study further shows the importance of output growth, exchange rate and inflation rate in explaining the terms of trade decomposition and concluded by providing some policy recommendations.

    Email it to me(Requires login) Download this PDF file
  • Email it to me(Requires login) Download this PDF file

  • References are not ready for this file yet, please refer to reference from the PDF file

  • Keywords

    Impulse response function, Terms of trade, Variance decomposition.


Other Informations

Top