Exchange Rate and Agricultural Sector Performance in South Africa: Time Series Analysis Approach

Tshephi Kingsley Thaba; Rudzani Nengovhela; Molobe Joyce Ramakgasha

doi:10.32479/ijefi.19800

Authors

Tshephi Kingsley Thaba University of Limpopo, Pretoria, 0008, South Africa
Rudzani Nengovhela University of Limpopo, Pretoria, 0008, South Africa
Molobe Joyce Ramakgasha University of Limpopo, Pretoria, 0008, South Africa

DOI:

https://doi.org/10.32479/ijefi.19800

Keywords:

Agricultural Exports, Correlation Matrix, Economic Performance, Exchange Rate, Fully Modified Ordinal Least Square

Abstract

The study investigated the intricate relationship between exchange rate fluctuations and the performance of the agricultural sector in South Africa data spanning from 1986 to 2022. Compound methodology was employed for analysis, where Johansen cointegration tests reveal the presence of long run relationship among the variables after series became stationary after first difference using Augmented Dicker Fuller. Pearson correlation matrix highlights the positive effect of real exchange rate fluctuations on the gross value of agricultural production, with agricultural exports playing a significant role in driving this relationship. Further analysis using the Fully Modified Ordinary Least Squares model confirmed a positive and statistically significant relationship between agricultural exports and the gross value of agricultural production. This suggests that policies promoting increased agricultural exports could lead to higher agricultural production values. The study recommends policymakers focus on implementing measures to stabilize and predict exchange rates, which can positively influence agricultural sector performance.