The Effects of Exchange Rates on Zimbabwe’s Exports
Abstract
The study reviewed the effect of exchange rates on exports in Zimbabwe using the Ordinary Least Squares (OLS) technique. The objective of the study was to examine the effects of exchange rate on export growth in Zimbabwe using mainly the multicurrency era data. This is because the exchange rate plays a key role in policy formulation and implementation. The study is significant as understanding the role of exchange rate on export guides policymakers in coming up with the right policy mix to stimulate exports. Using secondary data from ZIMSTAT and World Bank, obtained results from a robust regression showed that South Africa’s exchange rates (SAEXRT) were weakly significant at 10%, South Africa broad money supply (SAM2) was significant at 5% and imports (DDIMP) were important to Zimbabwe’s export growth at 1% level of significance. To increase exports, there is a need for policy shift, shifting from overly focusing on foreign direct investment and increasing gross domestic product (GDP) because empirical results showed that FDI and gross domestic product were not significant in the model. Policies such as trade cooperation between South Africa and Zimbabwe may increase exports given the impact of South Africa's broad money supply on Zimbabwe’s exports.
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