EconPapers    
Economics at your fingertips  
 

Shortlived supply shocks to potential growth

Byron Botha, Franz Ruch and Max Steinbach

No 8605, Working Papers from South African Reserve Bank

Abstract: Potential growth, or the non-inflationary rate of growth in output, is generally viewed as a slow-moving and smooth process. This implies that all the sudden changes in real gross domestic product (GDP), regardless of origin, are reflected in the output gap. There are, however, short-lived supply shocks. Recent examples include the platinum-sector strike of 2014 and the drought of 2015/16 that are more accurately identified as temporary shifts in potential growth. We update the South African Reserve Bank's current, finance-neutral, estimates of potential growth to account for these short-lived supply shocks. We compare the supply shocks, that should shift potential growth rather than the output gap generated from the model, to a structural vector autoregression (SVAR) model. The resulting output gap more accurately reflects a measure of demand pressures in the economy at any given point in time. The output gap is not as wide as previously estimated after 2015.

Date: 2018-06-22
New Economics Papers: this item is included in nep-mac
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://www.resbank.co.za/content/dam/sarb/publica ... 018/8605/WP1802a.pdf Revision (application/pdf)

Related works:
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:rbz:wpaper:8605

Access Statistics for this paper

More papers in Working Papers from South African Reserve Bank Contact information at EDIRC.
Bibliographic data for series maintained by Jessica VanWyk (jessica.vanwyk@resbank.co.za).

 
Page updated 2024-12-28
Handle: RePEc:rbz:wpaper:8605