Reading the Standard Bank report from the 31 August 2007, called Deficits to the Nines. An interesting read, and some important indicators for investors. I am however confused by Figure 5, which is titled as Correlation of different lags of the exchange rate and net exports. The figure has no dates - thus making it difficult to see what period is being analyzed. In addition, there is no indication of how significant the relations is. This is important since the report argues "But, as we've mentioned in previous reports, the contemporaneous relation between exchange rates and exports is not a particularly strong one given the lags involved in trade activity and the unlikely event that traders adjust their trading activities every time that the exchange rate changes." Surely, then the next step would be to measure how significant the relationship is. (Thinking back to stats classes, there are measures that test the strength of the relationship.) In short, how the economics team how the economics team argues that the relationship is not strong, but that exports will increase after fiur quarters based on the very same relationship baffles me. The conclsion reached tells me as an investor to look our for companies that export as they might have a better run in future, but as to why I should do that I am not sure. While I am at, what is the `credit crunch debacle' refereed to in the body of the report. I am not being critical for the sake of it, but we rely on these reports to inform our investment decisions. I am also surprised by the report as the economic department usually has a very high standard, with good substantiations for positions taken. Alternatively, I am just having a `dof' morning, and not understanding the arguments?
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