Fiscal r-star and macroeconomic coordination in South Africa

Roy Havemann () and Hylton Hollander ()
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Roy Havemann: Bureau for Economic Research
Hylton Hollander: University of Cape Town

No 302, ERSA Working Paper Series from Economic Research Southern Africa

Abstract: South Africa’s fiscal and monetary authorities now operate in a more difficult environment than they did a decade ago. Debt has risen, growth has disappointed, and sovereign risk premia have remained elevated. At the same time, inflation has fallen and the policy debate has shifted toward whether lower inflation can support growth. Our research shows that these developments are tightly connected.This brief is based on the ERSA working paper and a forthcoming South African Journal of Economics article, “Monetary-fiscal coordination in South Africa: Aligning the stars.” The paper introduces a new policy concept for South Africa: the fiscal-neutral real interest rate, or fiscal r-star. This is the real interest rate consistent with keeping the debt-to-GDP ratio stable for a given primary balance, growth rate, and debt stock. We compare this with the usual monetary r-star, the real interest rate consistent with inflation at target and output at potential.

Keywords: Monetary-fiscal coordination; South Africa (search for similar items in EconPapers)
JEL-codes: E52 E62 (search for similar items in EconPapers)
Pages: 8 pages
Date: 2026-04
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Published in ERSA Working Paper Series, April 2026, pages 8

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