Macro-fiscal analysis and policy modelling

South Africa’s economy experienced a particularly steep decline —relative to other emerging markets— during the 2009 Global Financial Crisis. These economic challenges were exacerbated by the COVID-19 pandemic and impact South Africa’s ability to expand health coverage, decrease unemployment, and increase start-up and entrepreneurship rates.

The work stream on Macro-fiscal analysis and policy modelling will improve policymakers’ and institutions’ abilities to carefully assess the risks and opportunities of the macroeconomic policies intended to solve South Africa’s economic problems. Through its efforts to improve the macroeconomic modeling capacity of the institutions responsible for economic policy, the work stream will strengthen decision-making and contribute to broader economic stability and growth in South Africa.

Additional work includes:

  • evaluation of coordination between macroeconomic policy components: their impact on each other and overall macroeconomic outcomes
  • evaluation of the conduct of fiscal policy against its stated objectives
  • evaluation of the Reserve Bank’s conduct of monetary policy against its stated objectives
  • improving our ability to model reality in macro simulations
  • estimation of the determinants of the yield curve and optimal debt management

Outputs

One of the primary goals of this work stream is to improve the flow of information from academics working on policy-relevant and evidence-based research to actual policymakers. As a continuation of SA-TIED Phase I, the macro-fiscal work stream will focus on four broad areas of policy:

  • fiscal policy (public investment and debt, tax policy, and expenditure)
  • monetary policy (including inflation targeting and exchange rate policy)
  • micro- and macroprudential policy
  • coordination of macroeconomic policy and its impact on savings, investment, and the balance of payments
Working paper
Ihsaan Bassier, Joshua Budlender, and Maya Goldman
Up-to-date, nationally representative household income/expenditure data are crucial to estimating poverty during the COVID-19 pandemic and to policy-making more broadly, but South Africa lacks such data. We present new pandemic poverty estimates, simulating incomes in...
July 2022
Macro-fiscal analysis
Working paper
Roy Havemann and Hylton Hollander
South Africa runs a primary fiscal deficit and the long-term interest rate on government borrowing, r, is greater than the long-term economic growth rate, g. Without intervention, debt will continue to rise until there is...
June 2022
Macro-fiscal analysis
Working paper
Patrick Honohan and Athanasios Orphanides
This paper reviews South Africa’s monetary policy since 2007 and makes recommendations towards improving the inflation-targeting framework currently in place. Following a surge in inflation into double digits in 2007/08, the South African Reserve Bank...
March 2022
Macro-fiscal analysis
Working paper
Ricardo Hausmann, Federico Sturzenegger, Patricio Goldstein, Frank Muci, and Douglas Barrios
This study analyses the performance of macroeconomic policy in South Africa in 2007–2020 and outlines challenges for policy in the coming decade. After remarkable economic growth in 1997–07, South Africa’s progress slowed dramatically in 2009...
February 2022
Macro-fiscal analysis
Report
SA-TIED
This report is a summary of the SA-TIED programme’s major research contributions to the policy environment. These contributions are not policy proposals, but are meant to inform the policymaking process and fill important gaps in...
January 2022
Enterprise development
Public revenue
Macro-fiscal analysis
Labour market and inequality
Climate and energy
Phase 1 regional growth
Working paper
Hylton Hollander
Debt-financed fiscal stimulus programmes directly stimulate aggregate demand through government expenditure or tax cuts, but their effectiveness is highly dependent on direct crowding out of private sector expenditure, spillover effects to the private sector through...
October 2021
Macro-fiscal analysis
Working paper
Nancy Mukalayi
This paper analyses how exchange rate volatility affects domestic consumption. It uses a Bayesian vector autoregression model to measure impulse response, based on South African data from 1990 to 2016, which helps to detect how...
January 2021
Macro-fiscal analysis
Working paper
Asiya Maskaeva and Mgeni Msafiri
This study simulates the macro-micro economic impacts of the employment policy, focusing on hysteresis in youth unemployment in South Africa. Specifically, we apply a dynamic computable general equilibrium model to calibrate the 2015 South African...
January 2021
Macro-fiscal analysis
Working paper
Hayelom Yrgaw Gereziher and Naser Yenus Nuru
This paper estimates the output cost of fighting inflation—the sacrifice ratio—for the South African economy using quarterly data spanning the period 1998Q1–2019Q3. To compute the sacrifice ratio, the structural vector autoregressive model developed by Cecchetti...
January 2021
Macro-fiscal analysis