What Are the Macroeconomic Effects of a Positive Interest Rate-GDP Growth Differential Shock?

Eliphas Ndou and Nombulelo Gumata
Additional contact information
Nombulelo Gumata: Eldoreigne X3

Chapter Chapter 16 in Fiscal Policy Shocks and Macroeconomic Growth in South Africa, 2023, pp 201-211 from Springer

Abstract: Abstract This chapter explored the macroeconomic effects of positive shocks to the interest rate-GDP growth differential. It further assessed whether positive and negative interest rate-GDP growth differential regimes exert different macroeconomic effects. We find that government debt and ten-year yields increase in response to positive shocks to the interest rate-GDP growth differential. The rand per US dollar (R/US$) exchange rate depreciates and inflation increases. There are asymmetries that are induced by the low and high-interest rate-GDP growth differential. The difference between the average interest rate governments pay on their debt and the economy’s nominal growth rate is a key variable for debt dynamics and sovereign sustainability analysis. Thus, policymakers should adopt policies that enhance fiscal sustainability.

Date: 2023
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:spr:sprchp:978-3-031-37755-6_16

Ordering information: This item can be ordered from
http://www.springer.com/9783031377556

DOI: 10.1007/978-3-031-37755-6_16

Access Statistics for this chapter

More chapters in Springer Books from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().