Time consistency and economic growth: A case study of South African macroeconomic policy

Christopher Loewald (), David Faulkner () and Konstantin Makrelov ()
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Christopher Loewald: South African Reserve Bank
David Faulkner: National Treasury
Konstantin Makrelov: South African Reserve Bank

No 84, ERSA Working Paper Series from Economic Research Southern Africa

Abstract: The numerous diagnostic studies and policy recommendations that exist for South Africa typically focus on microeconomic constraints to growth. Higher potential growth certainly requires structural reforms to boost productivity growth, in particular to allow private competition and investment in network sectors. But these reforms and others will also be more effective if macroeconomic policy facilitates the relative price adjustments and consequential factor allocations needed to achieve higher productivity. Sustained and large fiscal deficits, higher debt, and relatively high inflation all impede those price and factor adjustments. Looking back to the global financial crisis, different policy settings in fiscal, monetary and macroprudential policies, backed by structural reforms, could have supported higher growth outcomes and provided the fiscal space to respond to the current COVID-19 crisis more effectively.

Keywords: time consistency; macroeconomic policy (search for similar items in EconPapers)
JEL-codes: E62 E63 (search for similar items in EconPapers)
Date: 2024-09
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Published in ERSA Working Paper Series, September 2024

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