The Threshold Effects of Exchange Rates on Agricultural Exports: A Flow from South Africa to the Southern African Development Community

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The impact of exchange rates is a significant concern affecting trade in the SADC region. This study’s purpose is to assess the threshold effects of exchange rates on agricultural exports from SA to SADC from 2010 to 2022. A panel threshold estimation technique is applied to assess the exchange rates effects in different regimes that can be below or above the threshold value. This can reveal non-linear relationships that are often overlooked in traditional linear models. In this analysis, exchange rates are disaggregated into appreciation and depreciation, as it is critical to determine how these changes affect agricultural exports, which has not been achieved in previous studies. The findings of this study confirm the existence of a non-linear relationship between several key variables (depreciation, South Africa’s GDP, the GDP of the SADC, and South Africa’s population and agricultural exports). This contributes new insights to the existing literature on the SADC economies. The policymakers could implement an exchange rate stabilisation mechanism and promote the diversification of both market destinations and agricultural export products. The SADC economies could consider adopting flexible exchange rate regimes that respond to market forces, while taking into account external shocks and economic indicators to mitigate the effects of depreciation shocks. Furthermore, the findings from this study can aid policymakers in formulating effective strategies for managing exchange rates fluctuations and promoting agricultural export growth. The findings show that different segments of agricultural exports can inform targeted interventions aimed at supporting exporters, and relevant industries within the SADC region. These results can aid policymakers to develop strategies to support sustainable agricultural practises, and ensure that the sector can meet the growing demands of a larger population.