Exchange-rate dynamics in South Africa during the global COVID-19 pandemic

Abstract

This study examines the volatility of the USD/ZAR exchange rate in South Africa during the Covid-19 pandemic. Covid-19 was a global pandemic that affected all countries across the globe, placing limits on the mobility between cities and countries in terms of the movement of goods, services, and individuals. During this period more economically vulnerable countries, such as South Africa, were more predisposed to the effects of this and thus experienced increased levels of volatility within various markets. This research aims to take a closer look at the volatility of the foreignexchange market, between the South African rand and United States dollar, during the period, to determine if Covid-19 resulted in increased volatility within this market. Furthermore, this study takes a close look at the drivers of volatility during this period, to determine if the monetary and fiscal policies implemented by the South African government were successful in restricting the level of volatility. In order to determine the volatility of the USD/ZAR exchange rate, an EGARCH model is generated for the prior period, as well as for the period where covid was considered national state of disaster. This model revealed that, overall, there is volatility and specifically volatility clustering within the market, as both tests yielded significant results. However, it was noted that, during the Covid-19 period, the persistence of volatility as viewed in the GARCH variable was increased, meaning there was more persistent volatility during this period. When viewing the descriptive statistics of this model, it was noted that there was a larger period of volatility in prior periods, which indicated that monetary or fiscal policy may have been able to restrain this to an extent. To test this, the error correction model was estimated based on the monthly exchange rate, real interest rate, broad money supply and government spending. This estimation revealed that, while monetary policy tools, real interest rates and broad money supply were significant factors in the determination of the USD/ZAR exchange rate during this period, the fiscal-policy tool government spending did not. Lastly, this study determined that in the event of a global crisis, measures such as; decreasing the repo rate, are effective and should be utilised. As these measures assist borrowers in managing their financial obligations. An alternate SARB policy recommendation that proved to be fruitful is enhancing the liquidity in the banking sector, increased money supply assisted in maintaining exchange rate stability, by limiting volatility in the foreign exchange market. A final policy recommendation determined is that fiscal policies should not be used with the intention of affecting the exchange rate dynamics.

Nyakisiso ye e latelago e ka ga phetogophetogo ya kelo ya neeletsano ya USD/ZAR ka Afrika Borwa nakong ya leuba la Covid-19. Covid-19 e bile leuba la lefase ka bophara leo le amilego dinaga ka moka lefaseng ka bophara, le le beago mellwane ya mosepelo gare ga ditoropokgolo le dinaga go ya ka tshepelo ya dithoto, ditirelo le batho. Mo lebakeng le dinaga tseo di nago le ikonomi ya go fokola, go swana le Afrika Borwa, di amilwe kudu ke dikhuetso tse gomme ka go realo di itemogetse maemo ao a oketsegilego a phetogophetogo ka gare ga mebaraka ya go fapana. Maikemisetso a dinyakisiso tse ke go lebelela ka kelohloko go phetogophetogo ya mmaraka wa neeletsano ya dinaga tsa ka ntle gare ga ranta ya Afrika Borwa le tolara ya United States mo lebakeng le, go bona ge eba Covid-19 e feleleditse ka phetogophetogo ye e oketsegilego ka gare ga mmaraka wo. Go feta fao, nyakisiso ye e lebelela ka kelohloko dihlohleletsi tsa phetogophetogo mo lebakeng le, go bona ge eba dipholisi tsa ditshelete le ikonomi tseo di phethagaditswego ke mmuso wa Afrika Borwa e atlegile go thibela maemo a phetogophetogo. Go laetsa phetogophetogo ya kelo ya neeletsano ya USD/ZAR, mmotlolo wa EGARCH o tsweleleditswe lebaka le le fetilego, go tloga ka la 1 Febereware 2018 go fihla ka la 29 Febereware 2020 gammogo le lebakeng la Covid gare ga la 1 Matshe 2020 le mafelelo a kgwedi a maemo a bosetshaba a masetlapelo ka Aporele 2022. Mmotlolo wo o utolotse gore, ka kakaretso, go na le phetogophetogo le phetogophetogo ye e kgobokanego fela ka gare ga mmaraka, ka ge diteko ka bobedi di tsweleditse dipoelo tse bohlokwa. Le ge go le bjalo, go lemogilwe gore lebakeng la Covid-19, phegelelo ya phetogophetogo bjalo ka ge go bonwe ka gare ga phetogo ya GARCH go oketsegile, mo go supago gore go bile le phetogophetogo ye e phegeletsego kudu mo lebakeng le. Ge go lebelelwa dipalopalo tse di hlalosago tsa mmotlolo wo, go lemogilwe gore go bile le lebaka le letelele la phetogophetogo mo mabakeng ao a fetilego, yeo e laeditsego gore pholisi ya ditshelete goba ya ikonomi e ka ba e kgonne go thibela se go fihla bokgoleng bjo itsego. Go leka se, mmotlolo wa tokiso ya diphoso o akanyeditswe go ya ka kelo ya neeletsano ya kgwedi le kgwedi, kelo ya tswala ya nnete, kabo ya tshelete ye e nabilego le tshomiso ya tshelete ya mmuso. Kakanyetso ye e utolotse gore, le ge e le gore didiriswa tsa pholisi ya ditshelete, dikelo tsa tswala ya nnete le kabo ya tshelete ye e nabilego e be e le mabaka a bohlokwa mo go laetseng kelo ya neeletsano ya USD/ZAR mo lebakeng le, tshomiso ya tshelete ya mmuso ya sediriswa sa pholisi ya ditshelete ga se go be le khuetso ye kgolo godimo ga kelo ya neeletsano.

Die volgende studie oorweeg die wisselvalligheid van die USD/ZAR-wisselkoers in Suid-Afrika gedurende die Covid-19-pandemie. Covid-19 was ’n wêreldwye pandemie wat alle lande regoor die wêreld geraak het, en beperkings geplaas het op mobiliteit tussen stede and lande wat betref die beweging van goedere, dienste en individue. Gedurende hierdie tydperk was ekonomies kwesbare lande, soos Suid-Afrika, meer vatbaar vir hierdie nadelige gevolge van die pandemie, en het die lande dus verhoogde vlakke van wisselvalligheid in verskeie markte ervaar. Hierdie navorsing se doel is om die wisselvalligheid van die buitelandse-valutamark tussen die Suid Afrikaanse rand en die Amerikaanse dollar gedurende hierdie tydperk van nader te ondersoek, om te bepaal of Covid-19 verhoogde wisselvalligheid in hierdie mark tot gevolg gehad het. Verder kyk hierdie studie ook van naderby na die dryfvere van wisselvalligheid gedurende hierdie tydperk, om te bepaal of die monetêre en fiskale beleide wat deur die Suid-Afrikaanse regering geïmplementeer is, suksesvol was om die vlak van wisselvalligheid te beperk. Om die wisselvalligheid van die USD/ZAR-wisselkoers te bepaal is ’n EGARCH-model geskep vir die tydperk voor die Covid-19 pandemie, asook vir die Covid-tydperk tot die einde van die maand van die nasionale ramptoestand in Suid-Afrika. Hierdie model het onthul dat daar, oor die algemeen, wisselvalligheid en spesifiek wisselvalligheidsvorming in die mark is, aangesien albei toetse beduidende resultate gelewer het. Daar is egter agtergekom dat die voortduur van wisselvalligheid soos beskou in die GARCH-veranderlike toegeneem het gedurende die Covid-19-tydperk, wat beteken dat daar meer voortdurende wisselvalligheid gedurende hierdie tydperk was. Wanneer daar gekyk word na die beskrywende statistieke van hierdie model is daar opgelet dat daar ’n groter tydperk van wisselvalligheid in vorige tydperke was, wat aangedui het dat monetêre of fiskale beleid dit tot ’n mate kon beperk het. Om hierdie te toets is die foutregstellingsmodel beraam gebaseer op die maandelikse wisselkoers, reële rentekoers, breëgeldvooraad (broad money supply) en owerheidsbesteding. Hierdie beraming het onthul dat hoewel monetêre beleidshulpmiddels, reële wisselkoerse en breëgeldvoorraad beduidende faktore was in die bepaling van die USD-ZAR-wisselkoers gedurende hierdie tydperk, het owerheidsbesteding, ’n fiskale-beleidshulpmiddel, geen beduidende impak op die wisselkoers of die wisselvalligheid daarvan gehad nie.