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Effects of monetary and R&D policies on inequality and growth: The case of South Africa

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  • Yoseph Getachew
  • Richard Kima
  • Nyemwererai Matshaka

Abstract

This paper develops a two-agent worker-capitalist heterogeneous household monetary Schumpeterian growth model to examine the effects of R&D and monetary policies on economic growth and inequality. The model is then calibrated to the South African economy, an upper-middle-income African country infamous for its consistently high level of inequality. A higher nominal interest rate reduces innovation and economic growth but help to mitigate inequality. However, the reduction in consumption inequality comes from a disproportionate decline in the capitalists' condition.

Suggested Citation

  • Yoseph Getachew & Richard Kima & Nyemwererai Matshaka, 2025. "Effects of monetary and R&D policies on inequality and growth: The case of South Africa," WIDER Working Paper Series wp-2025-55, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2025-55
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