IDEAS home Printed from https://ideas.repec.org/a/taf/rseexx/v40y2016i3p21-38.html
   My bibliography  Save this article

Estimating and Explaining Changes in Potential Growth in South Africa

Author

Abstract

Estimates of potential output growth in SA have declined from over 3% prior to the Global Financial Crisis (GFC) to just over 2% currently. A similar slowdown has been experienced in several other countries, including most members of the G20. The purpose of this paper is to (i) estimate SA's level of potential output growth both before and after the GFC using a multivariate filter technique and (ii) attempt to explain the apparent decline in the growth potential by investigating the underlying drivers of potential GDP growth using a Cobb-Douglas- type production function. It is found that potential growth has declined to around 2.2% post-GFC. It is also determined that the biggest driver of the post-crisis decline in potential growth has been lower productivity growth.

Suggested Citation

  • J. Kemp & B. Smit, 2016. "Estimating and Explaining Changes in Potential Growth in South Africa," Studies in Economics and Econometrics, Taylor & Francis Journals, vol. 40(3), pages 21-38, December.
    • Handle: RePEc:taf:rseexx:v:40:y:2016:i:3:p:21-38
    DOI: 10.1080/10800379.2016.12097302
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/10800379.2016.12097302
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/10800379.2016.12097302?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. N Ehlers & L Mboji & M M Smal, 2013. "The pace of potential output growth in the South African economy," Working Papers 5600, South African Reserve Bank.
    2. Patrick Blagrave & Mr. Roberto Garcia-Saltos & Mr. Douglas Laxton & Fan Zhang, 2015. "A Simple Multivariate Filter for Estimating Potential Output," IMF Working Papers 2015/079, International Monetary Fund.
    3. Johannes Hermanus Kemp, 2015. "Measuring Potential Output for the South African Economy: Embedding Information About the Financial Cycle," South African Journal of Economics, Economic Society of South Africa, vol. 83(4), pages 549-568, December.
    4. Morten O. Ravn & Harald Uhlig, 2002. "On adjusting the Hodrick-Prescott filter for the frequency of observations," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 371-375.
    5. International Monetary Fund, 2010. "Estimating Potential Output with a Multivariate Filter," IMF Working Papers 2010/285, International Monetary Fund.
    6. Philippe Burger, 2014. "Inflation and Market Uncertainty in South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 82(4), pages 583-602, December.
    7. Luis M. Cubeddu & Alexander Culiuc & Ghada Fayad & Yuan Gao & Kalpana Kochhar & Annette J Kyobe & Ceyda Oner & Roberto Perrelli & Sarah Sanya & Evridiki Tsounta & Zhongxia Zhang, 2014. "Emerging Markets in Transition; Growth Prospects and Challenges," IMF Staff Discussion Notes 14/6, International Monetary Fund.
    8. Mr. Luis M. Cubeddu & Mr. Alexander Culiuc & Ms. Ghada Fayad & Miss Yuan Gao & Ms. Kalpana Kochhar & Ms. Annette J Kyobe & Ceyda Oner & Mr. Roberto Perrelli & Sarah Sanya & Ms. Evridiki Tsounta & Mr. , 2014. "Emerging Markets in Transition: Growth Prospects and Challenges," IMF Staff Discussion Notes 2014/006, International Monetary Fund.
    9. Ali Alichi, 2015. "A New Methodology for Estimating the Output Gap in the United States," IMF Working Papers 2015/144, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Byron Botha & Franz Ruch & Rudi Steinbach, 2018. "Shortlived supply shocks to potential growth," Working Papers 8605, South African Reserve Bank.
    2. Cobus Vermeulen, 2023. "The inherent uncertainties in output gap estimation a South African perspective," Working Papers 11051, South African Reserve Bank.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Byron Botha & Franz Ruch & Rudi Steinbach, 2018. "Shortlived supply shocks to potential growth," Working Papers 8605, South African Reserve Bank.
    2. Cobus Vermeulen, 2023. "The inherent uncertainties in output gap estimation a South African perspective," Working Papers 11051, South African Reserve Bank.
    3. Enrica Di Stefano & Daniela Marconi, 2015. "Assessing potential growth in emerging countries after the global financial crisis," Questioni di Economia e Finanza (Occasional Papers) 256, Bank of Italy, Economic Research and International Relations Area.
    4. Ali Alichi & Olivier Bizimana & Silvia Domit & Emilio Fernández Corugedo & Mr. Douglas Laxton & Kadir Tanyeri & Hou Wang & Fan Zhang, 2015. "Multivariate Filter Estimation of Potential Output for the Euro Area and the United States," IMF Working Papers 2015/253, International Monetary Fund.
    5. Ali Alichi & Rania A. Al-Mashat & Hayk Avetisyan & Mr. Jaromir Benes & Olivier Bizimana & Aram Butavyan & Mr. Robert Ford & Narek Ghazaryan & Vahagn Grigoryan & Mane Harutyunyan & Anahit Hovhannisyan , 2018. "Estimates of Potential Output and the Neutral Rate for the U.S. Economy," IMF Working Papers 2018/152, International Monetary Fund.
    6. Sariola, Mikko, 2019. "An unobserved components model for Finland – Estimates of potential output and NAWRU," BoF Economics Review 2/2019, Bank of Finland.
    7. Ms. Pritha Mitra & Amr Hosny & Gohar Abajyan & Mr. Mark Fischer, 2015. "Estimating Potential Growth in the Middle East and Central Asia," IMF Working Papers 2015/062, International Monetary Fund.
    8. Johannes W. Fedderke, 2022. "Identifying steady‐state growth and inflation in the South African economy, 1960–2020," South African Journal of Economics, Economic Society of South Africa, vol. 90(3), pages 279-300, September.
    9. Fukuda, Kayano, 2020. "Science, technology and innovation ecosystem transformation toward society 5.0," International Journal of Production Economics, Elsevier, vol. 220(C).
    10. Ali Alichi, 2015. "A New Methodology for Estimating the Output Gap in the United States," IMF Working Papers 2015/144, International Monetary Fund.
    11. Byron Botha & Eric Schaling, 2020. "Commodity Prices and Policy Stabilisation in South Africa," Working Papers 10225, South African Reserve Bank.
    12. Xu, Kun & Xu, Wenli, 2015. "中国政府消费支出对经济波动的传导机理分析 [Study on Influential Mechanism Between Government Expenditure of Consumption and Economic Fluctuation]," MPRA Paper 70994, University Library of Munich, Germany, revised Dec 2015.
    13. Johannes W. Fedderke & Daniel K. Mengisteab, 2017. "Estimating South Africa's Output Gap and Potential Growth Rate," South African Journal of Economics, Economic Society of South Africa, vol. 85(2), pages 161-177, June.
    14. Ansgar Belke & Christian Dreger & Irina Dubova, 2019. "On the exposure of the BRIC countries to global economic shocks," The World Economy, Wiley Blackwell, vol. 42(1), pages 122-142, January.
    15. Ajai Chopra, 2015. "Financing Productivity- and Innovation-Led Growth in Developing Asia: International Lessons and Policy Issues," Working Paper Series WP15-6, Peterson Institute for International Economics.
    16. Mr. Helge Berger & Mr. Thomas Dowling & Mr. Sergi Lanau & Mr. Mico Mrkaic & Mr. Pau Rabanal & Marzie Taheri Sanjani, 2015. "Steady as She Goes—Estimating Potential Output During Financial “Booms and Busts”," IMF Working Papers 2015/233, International Monetary Fund.
    17. Mr. Jiaqian Chen & Lucyna Gornicka, 2020. "Measuring Output Gap: Is It Worth Your Time?," IMF Working Papers 2020/024, International Monetary Fund.
    18. Mr. Niels-Jakob H Hansen & Mr. Joannes Mongardini & Fan Zhang, 2019. "Labor Market Slack and the Output Gap: The Case of Korea," IMF Working Papers 2019/167, International Monetary Fund.
    19. Miroslav Plašil, 2011. "Potenciální produkt, mezera výstupu a míra nejistoty spojená s jejich určením při použití Hodrick-Prescottova filtru [Potential Product, Output Gap and Uncertainty Rate Associated with Their Determ," Politická ekonomie, Prague University of Economics and Business, vol. 2011(4), pages 490-507.
    20. Duarte, Cláudia & Maria, José R. & Sazedj, Sharmin, 2020. "Trends and cycles under changing economic conditions," Economic Modelling, Elsevier, vol. 92(C), pages 126-146.

    More about this item

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:rseexx:v:40:y:2016:i:3:p:21-38. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/rsee .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.