Surprise, surprise : what drives the rand/U.S. dollar volatility? / prepared by Nasha Maveé, Roberto Perrelli, and Axel Schimmelpfennig.

"October 2016."

At head of title: International Monetary Fund, African Department and Strategy, Policy, and Review Department Department.

Includes bibliographical references (pages 34-36).

This paper investigates possible drivers of volatility in the South African rand since the onset of the global financial crisis. We assess the role played by local and international economic surprises, commodity price volatility, global market risk perceptions, and local political uncertainty. As a measure of rand volatility, the study uses a market-based implied volatility indicator for the rand / U.S. dollar exchange rate. Economic surprises--the difference between market expectations and data prints--are captured by Citi's Economic Surprise Index which is available for South Africa and its main economic partners. The results suggest that rand volatility is mainly driven by commodity price volatility, and global market volatility, as well as domestic political uncertainty. In addition, economic surprises originating in the United States matter, but not those originating from South Africa, Europe, or China.

Online resource; title from pdf title page (IMF.org Web site, viewed November 28, 2016).

Cover; Surprise, Surprise: What Drives the Rand / U.S. Dollar Exchange Rate Volatility?; I. INTRODUCTION; II. LITERATURE REVIEW; III. DATA; IV. CONTINUOUS TIME APPROACH; V. SENSITIVITY ANALYSIS; VI. EVENT STUDY ANALYSIS; VII. CONCLUSION; APPENDIX; References.

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