South Africa's trade balance heavily influenced by domestic income levels.
The study looked at how changes in exchange rates, prices, and income affect South Africa's trade balance. They found that in the long run, exchange rate changes have a bigger impact on trade balance than in the short run. However, domestic income has the largest effect on the trade balance, followed by consumer prices and then exchange rates. This suggests that policymakers should focus on boosting domestic income and supporting industries that reduce the need for imports to improve the trade balance.