posted on 2022-03-03, 11:59authored byCourage Mlambo
This study sought to examine the impact of the exchange rate on
manufacturing performance in SACU states. The manufacturing sector is an
avenue for trade expansion and it is a vital source of innovation and competi?tiveness and it makes outsized contributions to exports and productivity
growth. Manufacturing in SACU countries is hampered by structural shortcom?ings such as the exchange rate and other factors. Given this background, the
study employed the panel group FMOLS and PMG approaches for the period
1995–2016. Results showed that the exchange rate, imports and FDI have
a negative relationship with manufacturing performance. Exports and inflation
had a positive relationship with manufacturing performance. Based on the
findings of the study, it is recommended that SACU countries need to formulate
informed policies that align the exchange rate to the actual needs of the
manufacturing sector. Policymakers need to know which subsectors of the
manufacturing sector will be affected by an exchange rate change and they
also need to know the magnitude of the impact so that they can make
informed decisions.