Macroeconomic Adjustment and Policy in South Africa

Jakob Madsen ()

Studies in Economics and Econometrics, 1997, vol. 21, issue 2, 23-43

Abstract: This paper outlines a simple aggregate supply and demand side model of the South African economy. The model is used to analyse the effects of nominal demand shocks on wages, prices, output and employment, allowing for feed-backs from the foreign sector. Estimates of the model indicate that monetary policy has a minor impact on inflation but a strong impact on production and employment. In conjunction with a finding of hysteresis in unemployment and partly in production, this result suggests that the present strict monetary stance will leave permanent scars on the economy.

Date: 1997
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DOI: 10.1080/03796205.1997.12129107

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