Microsimulations of a dynamic SUT economy-wide Leontief-based model for the South African economy

An “Economy-Wide Leontief Multiplier Based Model” calibrated on Supply and Use Framework, and a “Micro-Simulation Model” is used to assess post-recession trends in macroeconomic, labour, and fiscal multipliers for South Africa. The simulations show that during the post-reces¬sion era, the effect of exogenous shock in the economy, like increases in investment spending, although positive, yielded a smaller return in terms of tax revenue, job creation and economic growth. At sector level, these results demonstrate how the inter-industry and industry-consumer links have weakened in the post-recession period. At policy level, the findings imply that the persisting low growth trajectory associated with weaker inter-industry linkages could be exacerbated, while the fiscal austerity measures associated with weaker forward and backword tax linkages could be prolonged. We recommend government should follow a priorities-based spending policy that yields optimal socioeconomic returns.