An investigation of the impact of exchange rate movements on consumer prices in the Southern African Customs Union (SACU)

Figures & data

Table 1. Descriptive statistics

	LCPI	LEX	LGDP	LIMP	LM2
Mean	1.921	1.890	7.901	22.020	3.787
Median	1.944	1.952	8.124	21.328	3.799
Maximum	3.073	2.802	9.084	25.377	4.312
Minimum	.3578	0.621	5.858	2.189	2.985
Std. Dev.	.480	0.530	.817	1.436	0.331
Skewness	−.357	−0.339	−.821	1.092	−0.431
Kurtosis	3.176	2.335	2.813	2.976	2.470
Jarque B.	3.496	5.823	17.648	3.825	6.618
P(JB)	.174	0.054	.000	.000	0.036
Sum	297.775	292.988	1224.589	3413.077	587.028
Sum Sq.Dev.	35.401	43.240	102.896	317.416	16.867
Observations	155	155	155	155	155

Source: Estimation by researcher using Eviews 12.

As shown in Table 1, the Jarque-Bera statistic illustrates that the GDP, money supply and import prices are statistically significant at a 5 percent level. As a result, it can be decided that the GDP, money supply and import prices are not normally distributed. Only the exchange rate and consumer prices are statistically insignificant and accept the null hypothesis of normal distribution. Therefore, we can conclude that the exchange rate and consumer prices are normally distributed. In addition, exchange rate and consumer prices are normally skewed while the gross domestic product and money supply are skewed to the left. Import prices are skewed to right.

Table 2. Correlation matrix

	LCPI	LEX	LGDP	LIMP	LM2
LCPI	1.000	−0.647	−.322	−.308	−0.352
LEX	−.647	1.000	.269	.279	0.498
LGDP	−.322	0.269	1.000	.664	0.562
LIMP	−.308	0.279	.664	1.000	0.535
LM2	−.352	0.498	.562	.535	1.000

Source: Estimation by researcher using Eviews 12.

Table 3. Panel unit root tests at level

		With Intercept		With Trend and Intercept
Variable	Test	Statistic	P-value	Statistic	P-value	Order of integration
	LLC	−3.263	0.000***	−4.393	0.000***	I (0)
LCPI	IPS	−2.236	0.013**	−4.001	0.000***	I (0)
	LLC	−2.466	0.007***	−1.448	0.074*	I (0)
LEX	IPS	−.157	0.438	−1.116	0.132	Not integrated
	LLC	−.729	0.233	.390	0.652	Not integrated
LGDP	IPS	.905	0.817	−.301	0.382	Not integrated
	LLC	−1.064	0.144	.766	0.778	Not integrated
LIMP	IPS	.529	0.702	.843	0.800	Not integrated
	LLC	.336	0.632	.689	0.755	Not integrated
LM2	IPS	.659	0.745	.246	0.597	Not integrated

Notes: The symbols ***, **, and * indicate statistical significance at 1%, 5%, and 10% levels, respectively.

Source: Estimation by researcher using Eviews 12.

Table 4. Panel unit root tests at difference

		With intercept		With trend and intercept
Variable	Test	Statistic	P-value	Statistic	P-value	Order of integration
	LLC	N/A	N/A	N/A	N/A	N/A
LEX	IPS	−6.071	0.000***	−5.115	0.000***	I (1)
	LLC	−7.867	0.000***	−6.821	0.000***	I (1)
LGDP	IPS	−6.642	0.000***	−5.116	0.000***	I (1)
	LLC	−6.005	0.000***	−5.146	0.000***	I (1)
LIMP	IPS	−5.228	0.000***	−3.963	0.000***	I (1)
	LLC	−3.427	0.000***	−1.639	0.051*	I (1)
LM2	IPS	−4.639	0.000***	−2.976	0.002***	I (1)

Notes: The symbols ***, **, and * indicate statistical significance at 1%, 5%, and 10% levels, respectively.

Source: Estimation by researcher using Eviews 12.

Table 5. Criteria Table

Model	LogL	AIC	SBC	HQC	Specification
4	41.536	0.241*	1.452	0.733	ARDL(2.2.2.2.2)
2	35.814	0.251	1.359	0.701	ARDL(1.2.2.2.2)
1	−2.579	0.505	1.203	0.788	ARDL(1.1.1.1.1)
2	2.231	0.507	1.308	0.833	ARDL(2.1.1.1.1)

Notes: * signifies the ideal model.

Source: Estimation by researcher using Eviews 12.

Table 6. Kao (1999) cointegration test findings

Test	ADF T-statistic	Probability	Conclusion
Kao Cointegration Test	−4.048	0.000***	Cointegrated

Notes: The symbols ***, **, and * indicate statistical significance at 1%, 5%, and 10% levels, respectively.

Source: Estimation by researcher using Eviews 12.

Table 7. Long-run regression estimates

Model: ARDL (2.2.2.2.2)
Predicted variable: LCPI
Regressors	Coefficient	Standard error	T-statistic	Probability
LEX	−0.212	0.076	−2.787	0.006**
LGDP	−0.572	0.161	−3.559	0.001***
LIMP	0.163	0.176	0.922	0.359
LM2	0.557	0.278	2.007	0.046**

Notes: The symbols ***, **, and * indicate statistical significance at 1%, 5%, and 10% levels, respectively.

Source: Estimation by researcher using Eviews 12.

Table 8. Short-run regression estimates

Model: ARDL (2.2.2.2.2)
Predicted Variable: D(LCPI)
Lagged variables	SOUTH AFRICA	BOTSWANA	ESWATINI	LESOTHO	NAMIBIA
D(LCPI (−1))	−0.175 (0.003)***	−0.283 (0.003)***	0.172 (0.004)*	0.423 (0.000)***	0.020 (0.216)
D(LEX (−1))	9.218 (0.372)	2.216 (0.035)**	−1.469 (0.596)	1.739 (0.102)	1.597 (0.369)
D(LGDP (−1))	6.372 (0.572)	2.719 (0.010)**	−1.742 (0.555)	0.534 (0.585)	1.356 (0.511)
D(LIMP (−1))	0.673 (0.091)*	−0.092 (0.351)	−0.845 (0.179)	1.418 (0.079)*	−1.835 (0.011)**
D(LM2 (−1))	1.565 (0.139)	0.946 (0.001)***	−0.8278 (0.344)	0.973 (0.011)**	−0.530 (0.053)*
ECT(−1)	−0.836 (0.000)***	−0.108 (0.006)***	−0.882 (0.000)***	−1.213 (0.000)***	−0.610 (0.000)***

Notes: The symbols ***, **, and * indicate statistical significance at 1%, 5%, and 10% levels, respectively.

The value inside the parentheses is the corresponding probability value for the t statistic parenthesis.

Source: Estimation by researcher using Eviews 12.

Table 9. Causality test findings

Null Hypothesis	Obs.	F-Statistic	Prob.	Decision
LEX does not Granger Cause LCPI	150	29.577	2.E–11	No Causality
LCPI does not Granger Cause LEX		6.295	0.002***	Causality
LGDP does not Granger Cause LCPI	150	5.137	0.007***	Causality
LCPI does not Granger Cause LGDP		0.422	0.657	No Causality
LIMP does not Granger Cause LCPI	148	1.751	0.177	No Causality
LCPI does not Granger Cause LIMP		0.466	0.628	No Causality
LM2 does not Granger Cause LCPI	150	2.295	0.105	No Causality
LCPI does not Granger Cause LM2		2.232	0.111	No Causality
LGDP does not Granger Cause LEX	150	1.241	0.292	No Causality
LEX does not Granger Cause LGDP		4.172	0.017**	Causality
LIMP does not Granger Cause LEX	148	1.478	0.235	No Causality
LEX does not Granger Cause LIMP		2.260	0.108	No Causality
LM2 does not Granger Cause LEX	145	0.995	0.373	No Causality
LEX does not Granger Cause LM2		0.762	0.469	No Causality
LIMP does not Granger Cause LGDP	148	0.860	0.425	No Causality
LGDP does not Granger Cause LIMP		2.375	0.097*	Causality
LM2 does not Granger Cause LGDP	145	1.520	0.222	No Causality
LGDP does not Granger Cause LM2		2.731	0.069*	Causality
LM2 does not Granger Cause LIMP	145	0.175	0.840	No Causality
LIMP does not Granger Cause LM2		2.652	0.074*	Causality

Notes: The symbols ***, **, and * indicate statistical significance at 1%, 5%, and 10% levels, respectively.

Source: Estimation by researcher using Eviews 12.

Table 10. Residuals diagnostics post-estimation findings

Test	Type of the test	Test Stat.	Probability	Decision
Normality test	Jacque-Bera	0.298	0.862	Fail to reject $H_0$
	Breusch and Pagan LM dependence test	15.843	0.104	Fail to reject $H_0$
Cross-section independence tests	Peseran cross-section dependence test	3.401	0.000***	Reject to reject $H_0$
	Peseran scaled LM dependence test	1.306	0.191	Fail to reject $H_0$
	Bias corrected LM dependence test	1.217	0.224	Fail to reject $H_0$

Notes: The symbols ***, **, and * indicate statistical significance at 1%, 5%, and 10% levels, respectively.

Source: Estimation by researcher using Eviews 12.

Kao, C. (1999). Spurious regression and residual-based tests for cointegration in panel data. Journal of Econometrics, 90(1), 1–44. https://doi.org/10.1016/S0304-4076(98)00023-2

 Web of Science ®Google Scholar