Estimating South Africa's Output Gap and Potential Growth Rate

This paper estimates the potential output of the South African economy using several filters. We demonstrate that potential output measures are very sensitive to the different methodologies. We also provide estimates of South Africa's potential growth rate over the 1960–2015 period. Current est...

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Bibliographic Details
Published in:The South African Journal of economics 2017-06, Vol.85 (2), p.161-177
Main Authors: Fedderke, Johannes W., Mengisteab, Daniel K.
Format: Article
Language:English
Subjects:
E23
E32
Economic analysis
Economic growth
Economic models
Growth rate
measurement of potential growth
Measurement of potential output
Mining
Mining industry
Resilience
South Africa
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Summary:This paper estimates the potential output of the South African economy using several filters. We demonstrate that potential output measures are very sensitive to the different methodologies. We also provide estimates of South Africa's potential growth rate over the 1960–2015 period. Current estimates of the potential growth rate fall in the 1.9%–2.3% range. However, the evidence suggests that the rate is under considerable downward pressure. South African potential growth may be headed toward the 1% range. The strongest decline is in the real sectors of the economy (Manufacturing, Mining), the greatest resilience in the service sectors (financial in particular).
ISSN:0038-2280
1813-6982
DOI:10.1111/saje.12153