Real Exchange Rate Volatility and Employment Growth in South Africa: The Case of Manufacturing

Working paper 737
Trust R. Mpofu and Eftychia Nikolaidou
Publication date: 
March, 2018

This paper investigates the effect of exchange rate volatility on employment growth in South Africa, a country that is characterised by high rates of unemployment and relatively high exchange rate volatility. Employing the Autoregressive Distributed Lag (ARDL) cointegration method over the period 1995Q3 to 2015Q2 and using a variety of specifications, results show that real exchange rate volatility has a significant contractionary effect on manufacturing employment growth. Furthermore, findings indicate that manufacturing output, wages and exports, as well as the level of real effective exchange rate and long-term interest rates have a significant impact on manufacturing employment growth.

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