The influence of gold price on exchange rates in South Africa

The relationship between mineral and exchange rate markets is still a relatively little developed area of research. Some studies regard mineral export prices as a relevant macroeconomic fundamental which, among other factors, can explain the performance of nominal and real exchange rates in a mineral-dependent economy. This paper investigates the role of the gold price for the South African real and nominal exchange rate in the 1980s and early 1990s, incuding a possible structural change in the late 1980s and considering the scope for other explanatory variables. Results are obtained from alternative procedures for co-integration analysis.