Exchange rate management in a resource-dependent economy

Molefhe, Lesego (2024). Exchange rate management in a resource-dependent economy. University of Birmingham. Ph.D.

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Abstract

This thesis investigates issues relating to the predominant culture of fixing the exchange rate in resource-rich economies. The fixed or pegged exchange rate regimes are based on substantial foreign exchange reserve liquidity, accrued almost entirely from natural-resource export earnings. The durability of this policy design, precisely in the context of perpetual recurrence of external shocks, disruptive technological innovations in the global value chain, as well as the potential depletion of natural-resource endowments, forms a central focus of this thesis. The thesis comprises a total of five related chapters, centered around the broad theme of exchange rate regime change, and a concluding sixth chapter, that summarizes the thesis. We explore whether or not there are any countries currently operating pegged regimes amongst the community of resource-dependent economies, with reasonable prospects of transitioning to a floating exchange rate regime in a smooth and orderly manner. A suite of analytical models are employed to this end, and the overarching finding is that the level of foreign exchange market development and financial sector depth, accessibility and efficiency in most of these countries, do not currently augur well for smooth and orderly transitions. By implication therefore, a large pool of resource-dependent economies would most likely face dire macroeconomic consequences if they were to exit their pegs today. Policymakers should thus, fast-track efforts to develop fundamental supportive elements for operating alternative exchange rate regimes, to minimize the risk of crashing-out of the pegs.

Type of Work:

Thesis (Doctorates > Ph.D.)

Award Type:

Doctorates > Ph.D.

Supervisor(s):