An analysis of exchange rate policies in the Republic of South Africa 1971-1977
Date
2015-02-05
Authors
Gidlow, Roger Malcolm
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Abstract
The breakdown of the system of fixed exchange rates, which
occurred in the western world in the early 1970s, has exerted marked
effects upon the exchange rate policies adopted by South Africa.
In particular, it has resulted in the local monetary authorities
practising a more active policy concerning the exchange rate value
of the rand. The purpose of this thesis is to describe and analyze
the exchange rate policies of the Renublic during the period from
1971 to 1977, and to offer recommendations For change.
The research procedure followed involved extensive gathering
of information from published literature, together with confidential
information disclosed to the writer by the Deputy Governor of the
Reserve Bank.
The thesis is divided into four sections. Section A reviews
the traditional exchange rate policy adopted by the South African
authorities, and their long-standing support for fixed but adjustable
exchange rates in the international monetary system. Section B
incorporates on historical review and analysis of changes in the
exchange rate for the rand which have materialised since 1971.
Section C focuses attention upon the attitudes of the local authorities
over the issue of reform of the exchange rate regime in the international
monetary system in the past few years. Section D is devoted to an
analysis of specific policy issues which have arisen in the conduct
of exchange rate policy in South Africa, and highlights areas where
improvements could be made. All four chapters in this Section were
submitted as evidence to the current Commission of Inquiry into the
Monetary System and Monetary Policy in South Africa.
One important conclusion of the study is that the more flexible
exchange rate policy adopted in South Africa has had very limited
success in affecting positively the current account of the balance
of payments. Conversely exchange rate policy appears to have been
more successful in improving the position on tht capital account.
(iv)
Another conclusion concerns deficiencies which exist in the provision
of foreign exchange facilities, and particularly in regard to forward
exchange. In some respects South African policy is characterized
by exchange rates and facilities which bear little relation to market
conditions. It is recommended that j mor># competitive market in
foreign exchange should be established in both spot and forward
transactions.
Description
A Thesis submitted to the Faculty of Commerce of the
University of the Witwatersrand, Johannesburg, for
the degree of Doctor of Philosophy
December 1978