The relationship between the forward and realised spot exchange rate in South Africa
It is well known that the forward exchange rate and the realised future spot exchange rate differ. This phenomenon is better known as the exchange rate puzzle. Two approaches were followed to ascertain whether this difference is due to the weak explanatory ability of current economic fundamentals or...
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doaj-2b15d57f554046aa9a52b1d26fae205e2021-02-02T06:07:40ZengAOSISJournal of Economic and Financial Sciences1995-70762312-28032012-04-015117519210.4102/jef.v5i1.312253The relationship between the forward and realised spot exchange rate in South AfricaChris van Heerden0André Heymans1School of Economics, North West UniversitySchool of Economics, North West UniversityIt is well known that the forward exchange rate and the realised future spot exchange rate differ. This phenomenon is better known as the exchange rate puzzle. Two approaches were followed to ascertain whether this difference is due to the weak explanatory ability of current economic fundamentals or whether the use of an ineffective econometric approach to model exchange rate theories is to blame. The first approach makes use of stationary economic time series data to model the ZAR/USD realised future spot exchange rate, while the second uses non-stationary level economic data to model the ZAR/USD realised future spot exchange rate. While the first approach reported weak results, the second approach illustrated that economic fundamentals are able to explain the ZAR/USD realised future spot exchange rate. These results also confirm that the exchange rate puzzle is a pseudoproblem.https://jefjournal.org.za/index.php/jef/article/view/312economic fundamentalsexchange rate puzzleforward exchange ratefractionally differenced datanon-stationary datarealised future spot exchange ratestationary data |
collection |
DOAJ |
language |
English |
format |
Article |
sources |
DOAJ |
author |
Chris van Heerden André Heymans |
spellingShingle |
Chris van Heerden André Heymans The relationship between the forward and realised spot exchange rate in South Africa Journal of Economic and Financial Sciences economic fundamentals exchange rate puzzle forward exchange rate fractionally differenced data non-stationary data realised future spot exchange rate stationary data |
author_facet |
Chris van Heerden André Heymans |
author_sort |
Chris van Heerden |
title |
The relationship between the forward and realised spot exchange rate in South Africa |
title_short |
The relationship between the forward and realised spot exchange rate in South Africa |
title_full |
The relationship between the forward and realised spot exchange rate in South Africa |
title_fullStr |
The relationship between the forward and realised spot exchange rate in South Africa |
title_full_unstemmed |
The relationship between the forward and realised spot exchange rate in South Africa |
title_sort |
relationship between the forward and realised spot exchange rate in south africa |
publisher |
AOSIS |
series |
Journal of Economic and Financial Sciences |
issn |
1995-7076 2312-2803 |
publishDate |
2012-04-01 |
description |
It is well known that the forward exchange rate and the realised future spot exchange rate differ. This phenomenon is better known as the exchange rate puzzle. Two approaches were followed to ascertain whether this difference is due to the weak explanatory ability of current economic fundamentals or whether the use of an ineffective econometric approach to model exchange rate theories is to blame. The first approach makes use of stationary economic time series data to model the ZAR/USD realised future spot exchange rate, while the second uses non-stationary level economic data to model the ZAR/USD realised future spot exchange rate. While the first approach reported weak results, the second approach illustrated that economic fundamentals are able to explain the ZAR/USD realised future spot exchange rate. These results also confirm that the exchange rate puzzle is a pseudoproblem. |
topic |
economic fundamentals exchange rate puzzle forward exchange rate fractionally differenced data non-stationary data realised future spot exchange rate stationary data |
url |
https://jefjournal.org.za/index.php/jef/article/view/312 |
work_keys_str_mv |
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