An empirical analysis of the determinants and growth of South African exports

Exports have considerable effects on economic growth, employment and trade so it is crucial to understand the factors that are responsible for their variation. This study analyses the fundamental determinants of exports using annual South African data covering the period 1980 to 2006. It initially provides an overview of the South African export structure and export growth. A review of theoretical determinants is then specified. The study tests for stationarity and cointegration using the Johansen (1991, 1995) methodology. A vector error correction model is run to provide robust determinant variables on exports. The following variables which have been found to have a long run relationship with exports include: the domestic price of exports, real effective exchange rate, trade openness, foreign income and price of inputs (cost of production). The estimate of the speed of adjustment coefficient found in this study indicates that about 96% of the variation in exports from its equilibrium level is corrected within one year. The results that have emerged from this analysis corroborate the theoretical predictions and are also supported by previous researchers or studies