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Strengthening the Macroeconomic Policy Framework in South Africa

  • Tatiana Lysenko
  • Geoff Barnard

South Africa’s macroeconomic framework has served the economy well, but should be strengthened to make the economy more resilient to external shocks. Enhancing the credibility of the inflation target would provide the monetary authorities with more space for flexibility in the face of exogenous shocks. To ease the pressure on the exchange rate emanating from high commodity prices and sentiment-driven surges in capital inflows, the accumulation of foreign exchange reserves by the central bank should be more rapid, and the removal of remaining controls on capital outflows should be accelerated. Fiscal policy has been generally sound, but should be tighter and more counter-cyclical during the economic upswings to prevent a structural deterioration of the fiscal balance and to create more room for manoeuvre during downturns. A fiscal rule that institutionally constrains discretionary policy may facilitate this task. It would also help ensure that the strong public commitment to address major social challenges, improve access to public services and promote long-term growth by investing in physical infrastructure and human capital can be sustained. In conjunction with a greater effort to identify and tax economic rents from natural resource extraction, consideration should be given to establishing a mechanism to manage commodity price windfalls. This paper relates to the 2010 Economic Survey of South Africa (www.oecd.org/eco/surveys/southafrica). Renforcer le dispositif de la politique macroéconomique en Afrique du Sud Le dispositif de politique macroéconomique de l’Afrique du Sud a produit de bons résultats, mais il convient de le renforcer pour assurer une plus grande résistance aux chocs externes. Améliorer la crédibilité de l’objectif d’inflation donnerait aux autorités monétaires plus de latitude pour réagir aux chocs exogènes. Afin de réduire la pression à la hausse du taux de change, résultant du prix élevé des matières premières et d’entrées de capitaux spéculatifs, il faudrait que la banque centrale laisse augmenter plus rapidement ses réserves de change et que la suppression des contrôles des mouvements de capitaux encore en vigueur s’accélère. La politique budgétaire a généralement été saine, mais devrait être resserrée et devenir plus anticyclique pendant les phases de reprise, pour éviter une dégradation structurelle du solde budgétaire et élargir la marge de manoeuvre disponible pendant les récessions. Une règle budgétaire faciliterait la tâche en soumettant les mesures discrétionnaires à une contrainte institutionnelle. Elle aiderait à garantir aussi le respect durable du ferme engagement de l’État de relever les grands défis sociaux, d’améliorer l’accès aux services publics et de promouvoir la croissance à long terme en investissant dans les infrastructures physiques et le capital humain. Tout en s’efforçant davantage de recenser et de taxer les rentes économiques liées à l’exploitation des ressources naturelles, on pourrait envisager d’instituer un mécanisme de gestion des recettes exceptionnelles tirées des matières premières. Ce document se rapporte à l’Étude économique de l’OCDE de l’Afrique du Sud 2010 (www.oecd.org/eco/etudes/afriquedusud).

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Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 847.

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Date of creation: 18 Feb 2011
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Handle: RePEc:oec:ecoaaa:847-en
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  1. Martin Schindler, 2009. "Measuring Financial Integration: A New Data Set," IMF Staff Papers, Palgrave Macmillan, vol. 56(1), pages 222-238, April.
  2. Corrinne Ho & Robert N. McCauley, 2003. "Living with flexible exchange rates: issues and recent experience in inflation targeting emerging market economies," BIS Working Papers 130, Bank for International Settlements.
  3. T D Karoro & M J Aziakpono & N Cattaneo, 2008. "Exchange rate pass-through to import prices in South Africa: Is there asymmetry?," Working Papers 79, Economic Research Southern Africa.
  4. Isabelle Joumard & Christophe André, 2008. "Revenue Buoyancy and its Fiscal Policy Implications," OECD Economics Department Working Papers 598, OECD Publishing.
  5. Amato, Jeffery D. & Gerlach, Stefan, 2002. "Inflation targeting in emerging market and transition economies: Lessons after a decade," European Economic Review, Elsevier, vol. 46(4-5), pages 781-790, May.
  6. Frankel, Jeffrey & Smit, Ben & Sturzenegger, Federico, 2007. "South Africa: Macroeconomic Challenges after a Decade of Success," Working Paper Series rwp07-021, Harvard University, John F. Kennedy School of Government.
  7. Eijffinger, Sylvester C W & Geraats, Petra M, 2002. "How Transparent are Central Banks?," CEPR Discussion Papers 3188, C.E.P.R. Discussion Papers.
  8. Dubravko Mihaljek & Marc Klau, 2008. "Exchange rate pass-through in emerging market economies: what has changed and why?," BIS Papers chapters, in: Bank for International Settlements (ed.), Transmission mechanisms for monetary policy in emerging market economies, volume 35, pages 103-130 Bank for International Settlements.
  9. Juan Angel Garcia & Adrian van Rixtel, 2007. "Inflation-linked bonds from a central bank perspective," Banco de Espa�a Occasional Papers 0705, Banco de Espa�a.
  10. Aron, Janine & Farrell, Greg & Muellbauer, John & Sinclair, Peter, 2010. "Exchange Rate Pass-through and Monetary Policy in South Africa," CEPR Discussion Papers 8153, C.E.P.R. Discussion Papers.
  11. Monique Reid & Stan Du plessis, 2010. "Loud And Clear? Can We Hear When The Sarb Speaks?," South African Journal of Economics, Economic Society of South Africa, vol. 78(3), pages 269-286, 09.
  12. Stéphanie Guichard & Mike Kennedy & Eckhard Wurzel & Christophe André, 2007. "What Promotes Fiscal Consolidation: OECD Country Experiences," OECD Economics Department Working Papers 553, OECD Publishing.
  13. repec:ner:tilbur:urn:nbn:nl:ui:12-172467 is not listed on IDEAS
  14. Stan du Plessis & Willem Boshoff, 2007. "A fiscal rule to produce counter-cyclical fiscal policy in South Africa," Working Papers 13/2007, Stellenbosch University, Department of Economics.
  15. Douglas Sutherland & Peter Hoeller & Balázs Égert & Oliver Röhn, 2010. "Counter-cyclical Economic Policy," OECD Economics Department Working Papers 760, OECD Publishing.
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