Identifying supply and demand shocks in the South African Economy, 1960–2020

South African Journal of Economics, 2022, vol. 90, issue 3, 349-389

Abstract: This paper addresses the identification of supply and demand shocks in the South African economy over the 1960–2020 period, the relative importance of the two types of shock to fluctuations of growth and inflation from their steady‐state values, as well as the potential impact of the two types of shocks on the steady‐state growth and inflation values. Crucially, the paper examines the significance of three alternative identification strategies on the nature of supply and demand shocks and their impact on the economy: zero shock covariance in the presence of long‐run demand neutrality; non‐zero shock covariance in the presence of long‐run demand neutrality and long‐run demand non‐neutrality with zero shock covariance. Interest lies in which of the identification strategies provides shock decompositions that are theoretically coherent and congruent with the empirics of South African growth and inflation. Results support non‐zero shock covariance in the presence of long‐run demand neutrality identification. The analysis suggests that growth shocks in South Africa are dominated by supply shocks, and inflation shocks by demand shocks. Further, negative supply shocks lower steady state growth and raise steady‐state inflation, while positive demand shocks only raise steady‐state inflation and are growth neutral. South Africa appears relatively isolated from international productivity shocks.

Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/saje.12325

Related works:
Working Paper: Identifying Supply and Demand Shocks in the South African Economy 19602020 (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:sajeco:v:90:y:2022:i:3:p:349-389

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0038-2280

Access Statistics for this article

South African Journal of Economics is currently edited by Philip A. Black

More articles in South African Journal of Economics from Economic Society of South Africa Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().