Macro-fiscal analysis

Presentation of SA-TIED Working Paper at IAAE China 2024

JUNE 2024

An SA-TIED work-in-progress Working Paper was presented at the Conference of the International Association for Applied Econometrics (IAAE China 2024) from June 7 to June 9 by SA-TIED Research Fellow, Richard Kima. 

The working paper, titled "Estimating the Macroeconomic Costs of Power Outages in South Africa," assesses the full-scale macroeconomic costs of power outages, commonly referred to as "load shedding," within a structural dynamic macroeconomic model following the methodology of Fried and Lagakos (2023). In this model, power outages create idle resources that diminish the scale of existing firms and discourage the entry of new firms, resulting in lower productivity. The model is calibrated to the South African economy and serves as a laboratory for various experiments, including estimating the short- and long-run effects of eliminating power outages and evaluating their costs.

Preliminary findings suggest that the monetary costs of unadjusted load shedding for the South African economy were approximately R 911 billion in 2022, equivalent to R 632 billion in real terms, representing an output loss of 13.7%.