The relationship between commodity price volatility and exchange rate stability in a single commodity dependent economy: The case of Zambia
Master Thesis
2017
Permanent link to this Item
Authors
Supervisors
Journal Title
Link to Journal
Journal ISSN
Volume Title
Publisher
Publisher
University of Cape Town
Department
Faculty
License
Series
Abstract
This study examines the empirical relationship between monthly spot copper price movements and monthly Zambian Kwacha / US Dollar spot exchange rates, for the period January 2005 to February 2015. The ARDL bounds short-run estimate reveals there is both positive and negative coefficient interaction of copper price movements on the exchange rates in the short-run. However, the overall impact of copper prices on the exchange rate, is not significant in the short-run. The ARDL bounds test also confirms the presence of a long-run relationship between copper prices and the exchange rate. The coefficient estimates reveal that both the consumer price index and the terms-of-trade have a statistical weak impact on the exchange rate in both the short and long run. The study finds that Zambia's GDP has a negative impact on the exchange rate in the short-run, but has a statistically significant positive long-run effect. China's GDP, is used as a proxy to capture foreign demand for copper, it has both a positive and negative interaction on the exchange rate in the short-run and a negative effect in the long-run.
Description
Keywords
Reference:
Anderson, L. 2017. The relationship between commodity price volatility and exchange rate stability in a single commodity dependent economy: The case of Zambia. University of Cape Town.