Article Sidebar

Submitted
February 12, 2026
Accepted
April 3, 2026
Published
April 30, 2026
Download
Full text PDF
Statistic
Read Counter : 0 Download : 0

Downloads

Download data is not yet available.

Main Article Content

Abstract

Purpose — This paper examines the relationship between South Africa’s rising public debt and real exchange rate (RER) volatility. Over the past two decades, the country has experienced an alarming increase in external and domestic debt levels, accompanied by episodes of exchange rate instability and deteriorating economic performance.
Method — Using annual data from 2000 to 2024, we estimate an ARDL model to assess the nexus between debt and exchange rate volatility.
Findings — The results suggest that public debt is a significant driver of exchange rate volatility and rand depreciation. However, interest rates, inflation, and trade openness are key factors responsible for significant fluctuations in the exchange rate in South Africa. Similar results are obtained in both the short-run and long-run estimation.
Implications — The paper recommends firm government controls designed to prevent sharp capital movements (inflows or outflows) that could destabilise the rand. This can be achieved by maintaining a favourable trade balance, targeting inflation, and adjusting monetary policy. Secondly, the government can diversify the composition of its debt currency. This helps reduce volatility in debt-servicing payments and further stabilises government budgets and fiscal planning.
Originality — There is little empirical literature on the direct relationship between public debt and real exchange rate volatility in South Africa. This study aims to fill the gap by providing a novel empirical assessment of the long- and short-run dynamics between rising public debt and real exchange rate volatility.

Keywords

Public Debt Real Exchange Rate Volatility South Africa Economic Growth ARDL Model

Article Details

License

Copyright (c) 2026 Yonela Tyani, Chuma Mbaleki, Asive Nodo

Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Authors who publish with this journal agree to the following terms:

  1. Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution-ShareAlike 4.0 International License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
  2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
  3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).

Creative Commons License

Economic Journal of Emerging Markets by Center for Economic Studies, Universitas Islam Indonesia is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

How to Cite
Tyani, Y., Mbaleki, C., & Nodo, A. (2026). Public debt dynamics and real exchange rate volatility: Evidence from South Africa. Economic Journal of Emerging Markets, 18(1), 67–78. https://doi.org/10.20885/ejem.vol18.iss1.art6
Download Citation
Endnote/Zotero/Mendeley (RIS)
BibTeX

References

  1. Armah, M. K., Ofori, I. K., & Andoh, F. K. (2023). A re-examination of the exchange rate — Interest rate differential relationship in Ghana. Heliyon, 9(4), e14605. https://doi.org/10.1016/j.heliyon.2023.e14605 DOI: https://doi.org/10.1016/j.heliyon.2023.e14605
  2. David, O. S. (2024). Impact of macroeconomic variables on exchange rate in south africa. International Journal of Development and Economic Sustainability, 12(3), 26—35. https://doi.org/10.37745/ijdes.13/vol12n32635 DOI: https://doi.org/10.37745/ijdes.13/vol12n32635
  3. Donnat, G. (2025). Real exchange rate and external public debt in emerging and developing countries. http://195.220.190.85/GREDEG-WP-2025-15.pdf
  4. Ganelli, G., & Rankin, N. (2020). Fiscal deficits as a source of boom and bust under a common currency. Journal of International Money and Finance, 104, 102149. https://doi.org/10.1016/j.jimonfin.2020.102149 DOI: https://doi.org/10.1016/j.jimonfin.2020.102149
  5. Georgescu, I. A., Oprea, S.-V., & Bâra, A. (2024). Investigating the relationship between macroeconomic indicators, renewables and pollution across diverse regions in the globalization era. Applied Energy, 363, 123077. https://doi.org/10.1016/j.apenergy.2024.123077 DOI: https://doi.org/10.1016/j.apenergy.2024.123077
  6. Ghauri, S. P., Ahmed, R. R., Streimikiene, D., Qadir, H., & Hayat, A. (2024). Macroeconomic factors driving exchange rate volatility and economic sustainability: case study of Pakistan. Amfiteatru Economic, 26(66), 612—628. https://doi.org/10.24818/EA/2024/66/612 DOI: https://doi.org/10.24818/EA/2024/66/612
  7. Goonawardhana, V. U. W., & Dissanayake, D. M. U. H. (2023). The Effect of Financial Development on Economic Growth; Incorporation with Impact of the COVID-19 Pandemic: Evidence from Asian Frontier Financial Markets. South Asian Journal of Business Insights, 3(2), 69—89. https://doi.org/10.4038/sajbi.v3i2.58 DOI: https://doi.org/10.4038/sajbi.v3i2.58
  8. IMF. (2025). GLOBAL FINANCIAL STABILITY REPORT Shifting Ground beneath the Calm. https://www.imf.org/-/media/files/publications/gfsr/2025/october/english/text.pdf
  9. Kandil, M. (2015). On the benefits of nominal appreciations: Contrasting evidence across developed and developing countries. Borsa Istanbul Review, 15(4), 223—236. https://doi.org/10.1016/j.bir.2015.06.003 DOI: https://doi.org/10.1016/j.bir.2015.06.003
  10. Khomo, M. M., & Aziakpono, M. J. (2020). The behaviour of the real effective exchange rate of South Africa: Is there a misalignment? Cogent Economics & Finance, 8(1), 1760710. https://doi.org/10.1080/23322039.2020.1760710 DOI: https://doi.org/10.1080/23322039.2020.1760710
  11. Kilian, L., & Lütkepohl, H. (2017). Structural vector autoregressive analysis: (1st ed.). Cambridge University Press. https://doi.org/10.1017/9781108164818 DOI: https://doi.org/10.1017/9781108164818
  12. Koçak, M. (2025). Evaluation of public debt management practices in turkey from a historical perspective. Üçüncü Sektör Sosyal Ekonomi Dergisi, 60(2), 1997—2010. https://doi.org/10.63556/tisej.2025.1555 DOI: https://doi.org/10.63556/tisej.2025.1555
  13. Kuranga, A. O., Afolabi, A. C., Jimoh, M. M., & Ojuolape, M. A. (2025). Public Debt Dynamics and Exchange Rate in Nigeria. Sri Lankan Journal of Business Economics, 14(1), 50—70. https://mgt.sjp.ac.lk/bec/wp-content/uploads/2025/06/SLJBE-Vol.-14-1-May-2025-Artical-04.pdf DOI: https://doi.org/10.31357/sljbe.v14.8390
  14. Lütkepohl, H., & Schlaak, T. (2019). Bootstrapping impulse responses of structural vector autoregressive models identified through GARCH. Journal of Economic Dynamics and Control, 101, 41—61. https://doi.org/10.1016/j.jedc.2019.01.008 DOI: https://doi.org/10.1016/j.jedc.2019.01.008
  15. Magubane, K. (2025). Determinants of Financial Stability and Development in South Africa: Insights from a Quantile ARDL Model of the South African Financial Cycle. Journal of Risk and Financial Management, 18(9). https://doi.org/10.3390/jrfm18090495 DOI: https://doi.org/10.3390/jrfm18090495
  16. Manguzvane, M. M., & Biyase, M. (2023). Exchange rate risk and sovereign debt risk in south africa: a regime dependent approach. Economic and Well-being Research Group. https://www.uj.ac.za/wp-content/uploads/2022/01/manguvzane-biyase-exchange-rate-risk-and-sovereign-debt-risk-in-south-africa-a-regime-dependent-approach.pdf
  17. Matlasedi, T. N. (2017). The influence of the real effective exchange rate and relative prices on South Africa’s import demand function: An ARDL approach. Cogent Economics & Finance, 5(1), 1419778. https://doi.org/10.1080/23322039.2017.1419778 DOI: https://doi.org/10.1080/23322039.2017.1419778
  18. Mbaleki, C. (2024). Decomposing south africa’s fiscal dynamics through successive policy regimes in the post-apartheid dispensation. Journal of Public Administration, 59(2), 210—222. https://doi.org/10.53973/jopa.2024.59.2.a4 DOI: https://doi.org/10.53973/jopa.2024.59.2.a4
  19. Mbali, A. (2021). Public debt and economic growth: empirical evidence from South Africa. http://hdl.handle.net/11427/35872
  20. Mehtiyev, J., Magda, R., & Vasa, L. (2021). Exchange rate impacts on international trade. Economic Annals-ХХI, 190(5-6(2)), 12—22. https://doi.org/10.21003/ea.V190-02 DOI: https://doi.org/10.21003/ea.V190-02
  21. Mohr, P. (2020). Economics for south african students (6th ed.). Van Schaik Publishers.
  22. Moloi, V. M. M. (2023). The impact of exchange rate, interest rate, and international trade in selected Southern African Development Community (SADC) countries: an ARDL approach. Eurasian Journal of Economics and Finance, 11(3—4), 144—158. https://doi.org/10.15604/ejef.2023.11.0304.004 DOI: https://doi.org/10.15604/ejef.2023.11.0304.004
  23. Nicita, A. (2013). Exchange rates, international trade and trade policies. International Economics, 135—136, 47—61. https://doi.org/10.1016/j.inteco.2013.10.003 DOI: https://doi.org/10.1016/j.inteco.2013.10.003
  24. Nuru, N. Y., & Gereziher, H. Y. (2021). The impacts of public expenditure innovations on real exchange rate volatility in South Africa. DOI: https://doi.org/10.35188/UNU-WIDER/2021/010-8
  25. Nyoro, N., & Njaramba, S. G. (2025). Dynamic relationship between public debt and exchange rate misalignment in kenya. American Journal of Industrial and Business Management, 15(11), 1771—1790. https://doi.org/10.4236/ajibm.2025.1511091 DOI: https://doi.org/10.4236/ajibm.2025.1511091
  26. Olamide, E., Ogujiuba, K., & Maredza, A. (2022). Exchange Rate Volatility, Inflation and Economic Growth in Developing Countries: Panel Data Approach for SADC. Economies, 10(3). https://doi.org/10.3390/economies10030067 DOI: https://doi.org/10.3390/economies10030067
  27. Olaoye, O. O., Tabash, M. I., Omokanmi, O. J., Ogunjumo, R. A., Ojelade, M. O., & Ishola, J. A. (2022). Macroeconomic implications of escalating stock of public debt: Evidence from sub-Saharan African economies. African Development Review, 34(4), 527—540. https://doi.org/https://doi.org/10.1111/1467-8268.12677 DOI: https://doi.org/10.1111/1467-8268.12677
  28. Ormaechea, S. A. (2020). Public debt dynamics and intra-year exchange rate fluctuations. IMF Working Papers, 20(261). https://doi.org/10.5089/9781513561585.001 DOI: https://doi.org/10.5089/9781513561585.001
  29. Özen, E., Özdemir, L., & Grima, S. (2020). The relationship between the exchange rate, interest rate, and inflation: the case of Turkey. Scientific Annals of Economics and Business, 67(2), 259 — 275. https://www.ceeol.com/search/article-detail?id=913840 DOI: https://doi.org/10.47743/saeb-2020-0014
  30. Patel, D., & Mah, G. (2018). Relationship between Real Exchange Rate and Economic Growth: the case of South Africa. In Journal of Economics and Behavioral Studies (Vol. 10, Number 1). https://doi.org/10.22610/jebs.v10i1(J).2098 DOI: https://doi.org/10.22610/jebs.v10i1.2098
  31. Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289—326. https://doi.org/10.1002/jae.616 DOI: https://doi.org/10.1002/jae.616
  32. Priyatna, H. N., Suryadi, I., & Ersanti. (2025). Facing global inflation: economic strategies to strengthen people’s purchasing power. MSJ : Majority Science Journal, 3(1), 73—81. https://doi.org/10.61942/msj.v3i1.312 DOI: https://doi.org/10.61942/msj.v3i1.312
  33. Rapetti, M. (2020). The real exchange rate and economic growth: a survey. Journal of Globalization and Development, 11(2), 20190024. https://doi.org/10.1515/jgd-2019-0024 DOI: https://doi.org/10.1515/jgd-2019-0024
  34. Sang, D. J., Nganai, S., & Kemboi, I. (2025). Selected Monetary and Fiscal Factors and Exchange Rate Volatility: An Empirical Analysis of Money Supply, Inflation, Foreign Reserves and External Debt in East Africa Partner States. https://doi.org/10.51244/IJRSI DOI: https://doi.org/10.51244/IJRSI.2025.120700059
  35. Usman, K. (2025). A new analytical framework for investigating the debt-growth nexus in E7 economies. Journal of Applied Economics, 28(1), 2600821. https://doi.org/10.1080/15140326.2025.2600821 DOI: https://doi.org/10.1080/15140326.2025.2600821
  36. Yussif, A.-R. B., Onifade, S. T., Ay, A., Canitez, M., & Bekun, F. V. (2022). Modeling the volatility of exchange rate and international trade in Ghana: empirical evidence from GARCH and EGARCH. Journal of Economic and Administrative Sciences, 40(2), 308—324. https://doi.org/10.1108/JEAS-11-2020-0187 DOI: https://doi.org/10.1108/JEAS-11-2020-0187
No Related Submission Found