Estimating and Explaining Changes in Potential Growth in South Africa

Johannes Kemp and Ben Smit

Studies in Economics and Econometrics, 2016, vol. 40, issue 3, 21-38

Abstract: Estimates of potential output growth in SA have declined from over 3% prior to the Global Financial Crisis (GFC) to just over 2% currently. A similar slowdown has been experienced in several other countries, including most members of the G20. The purpose of this paper is to (i) estimate SA's level of potential output growth both before and after the GFC using a multivariate filter technique and (ii) attempt to explain the apparent decline in the growth potential by investigating the underlying drivers of potential GDP growth using a Cobb-Douglas- type production function. It is found that potential growth has declined to around 2.2% post-GFC. It is also determined that the biggest driver of the post-crisis decline in potential growth has been lower productivity growth.

Date: 2016
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Working Paper: Estimating and explaining changes in potential growth in South Africa (2015)
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DOI: 10.1080/10800379.2016.12097302

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