The Impact of the International Economic Crisis in South Africa

Margaret Chitiga, Ramos Mabugu, Hélène Maisonnave, Véronique Robichaud and Bernard Decaluwe ()
Authors registered in the RePEc Author Service: Margaret Mabugu

Cahiers de recherche from CIRPEE

Abstract: A dynamic computable general equilibrium model based on the PEP standard model developed by Decaluwé et al. (2009) is used to evaluate the impacts of the international crisis on the South African economy. However, we have changed some assumptions in order to better represent South African specificities. A major innovation in this regard is the modelling of unemployment and the influence of labour unions on the labour market. Two scenarios encompassing a severe and moderate recession are run. The effects of the crisis on the economy are really quite harsh, even in the moderate recession scenario, both in the short run and the long run. Indeed, the decrease of world prices combined with the drop of world demand lead to a decrease in production for many sectors with consequent laying off of workers. The impact on institutions is also worrying: agents see their income as well as their savings decreasing. The huge drop in firms’ savings has a dire impact on total investment while the huge negative impact on government accounts of protracted slow global growth imply tight public budgets for some time to come. Thus, some gains made by the government prior to the crisis may have been reversed by the economic crisis. It is apparent from the results that the impact of the crisis will drag into the long run with the situation still below what it would have been in the absence of a crisis until 2015.

Keywords: Dynamic Computable General Equilibrium; Economic Crisis; South Africa (search for similar items in EconPapers)
JEL-codes: D58 F47 O55 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-afr and nep-cmp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:lvl:lacicr:0952

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