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The Consequences of Policy Uncertainty [electronic resource] : Disconnects and Dilutions in the South African Real Effective Exchange Rate-Export Relationship. / Sandile Hlatshwayo.

Hlatshwayo, Sandile [Browse]
Washington, D.C. : International Monetary Fund, 2016.
1 online resource (30 p.)
IMF Working Papers [More in this series]
Summary note:
In recent years, the link between the real effective exchange rate (REER) and exports in South Africa has weakened. While exports still rise in response to REER depreciations, the REER-export elasticity is below historical estimates. The literature has put forward a number of possible explanations, from multi-national supply-chains to muted exchange rate pass-through. This research explores the role of policy uncertainty in reducing the responsiveness of exports to relative price changes. We construct a novel "news chatter" measure of policy uncertainty and examine how it, paired with other supply-side constraints, can improve our understanding of export performance. We find that increased policy uncertainty diminishes the responsiveness of exports to the REER and has short and long-run level effects on export performance. Finally, we show that a measure of competitiveness that adjusts for uncertainty and supply-side constraints greatly outperforms the REER in tracking exports performance.
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Description based on print version record.
  • 1484383494 :
  • 10.5089/9781484383490.001
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