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A semistructural approach to estimate South Africas potential output

Author

Listed:
  • Vafa Anvari
  • Nelne Ehlers
  • Rudi Steinbach

Abstract

The impact of the global financial crisis on estimates of potential output, and specifically the usefulness of accounting for financial effects in the estimation process, deserves special consideration. In this paper possible paths that potential output may follow after the financial crisis are discussed and a finance-neutral potential output measure is proposed. This approach incorporates information from financial indicators in the cycle of economic activity and it is shown that when financial shocks are controlled for, the level of potential output is lower in the build-up to the financial crisis and thereafter. When compared to other frequently used methods to estimate potential output, this approach appears to deliver more reliable estimates of the output gap, particularly in real-time.

Suggested Citation

  • Vafa Anvari & Nelne Ehlers & Rudi Steinbach, 2014. "A semistructural approach to estimate South Africas potential output," Working Papers 6504, South African Reserve Bank.
    • Handle: RePEc:rbz:wpaper:6504
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    File URL: http://www.resbank.co.za/content/dam/sarb/publications/working-papers/2014/6504/WP1408.pdf
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    Cited by:

    1. Kabundi, Alain & Mlachila, Montfort, 2019. "The role of monetary policy credibility in explaining the decline in exchange rate pass-through in South Africa," Economic Modelling, Elsevier, vol. 79(C), pages 173-185.
    2. Eric Schaling & Kgotso Morema, 2022. "Optimalinterestrategapsforflexibleinflationtargeting," Working Papers 11037, South African Reserve Bank.
    3. Cobus Vermeulen, 2023. "The inherent uncertainties in output gap estimation a South African perspective," Working Papers 11051, South African Reserve Bank.
    4. Byron Botha & Eric Schaling, 2020. "Commodity Prices and Policy Stabilisation in South Africa," Working Papers 10225, South African Reserve Bank.
    5. Johannes Hermanus Kemp, 2015. "Measuring Potential Output for the South African Economy: Embedding Information About the Financial Cycle," South African Journal of Economics, Economic Society of South Africa, vol. 83(4), pages 549-568, December.
    6. Johannes W. Fedderke, 2022. "Identifying steady‐state growth and inflation in the South African economy, 1960–2020," South African Journal of Economics, Economic Society of South Africa, vol. 90(3), pages 279-300, September.
    7. Byron Botha & Lauren Kuhn & Daan Steenkamp, 2020. "Is the Phillips curve framework still useful for understanding inflation dynamics in South Africa," Working Papers 10211, South African Reserve Bank.

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