Exchange rate variability and export growth in Fiji

Abstract

This paper conducts an empirical investigation of the effects of increase in real exchange variability on the slowdown of exports growth in Fiji for the period 1981:01 to 1997:06. Using error-correction and cointegration modelling techniques, it is shown that real exchange rate variability has both short and long-run adverse effects on exports growth. However, the magnitude of the effects is not as significant as expected. Other factors which have a greater impact on exports growth are the level of the real exchange rate, foreign real income and relative prices. It is concluded that policymakers must give attention not only to the level of the real exchange rate but also its stability in efforts to promote exports growth.