Front Matter Page
© 2008 International Monetary Fund
October 2008
IMF Country Report No. 08/347
South Africa: Selected Issues
This Selected Issues paper for South Africa was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on August 15, 2008. The views expressed in this document are those of the staff team and do not necessarily reflect the views of the government of South Africa or the Executive Board of the IMF.
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Front Matter Page
INTERNATIONAL MONETARY FUND
SOUTH AFRICA
Selected Issues
Prepared by a staff team consisting of Sharmini Coorey (head), Alfredo Cuevas, Nikolay Gueorguiev, Luc Eyraud (all AFR)
Approved by African Department
August 15, 2008
Contents
I. Monetary Policy and Large Shocks to Relative Prices: International Experience and Implications for South Africa
A. First and Second Round Effects of Relative Price Shocks
B. Historical Perspective on Monetary Policy Responses to Relative Price Shocks
C. Recent Monetary Policy Decisions Around the World
D. Concluding Remarks
Appendix
References
Tables
I.1. Granger Causality Tests
I.2. Estimation of Equation 1 for Several Inflation Targeting Countries
I.3. Distribution of the Coefficient on the Variable Representing Underlying Inflation
I.4. Distribution of the Coefficient on the Variable Representing Relative Price Shocks
I.5. Selected Recent Tightening Decisions
I.6. Selected Recent Easing Decisions
Figures
I.1. Food and Price Shocks in Perspective
I.2. Second Round Effects of Shocks to Food Prices
I.3. Second Round Effects May Already Be in Train in South Africa
I.4. Indicators of Inflation in Sample Countries
I.5. Rolling Estimates of Equation 1 for South Africa
I.6. Implicit Lengthening of the Policy Horizon in South Africa
II. Constraints on Growth in South Africa: Lessons from a Cross-Country Comparison
A. Introduction
B. What Have Been the Main Constraints on Growth in South Africa over the Last Decade?
C. Has Low Saving Contributed to the Relative Weakness of Investment in South Africa?
D. How to Release the Saving Constraint Weighing on Investment and Growth?
E. Conclusion and Policy Implications
Appendix
References
Tables
II.1. Normalized Contributions of Demand Components to GDP Growth
II.2. Employment and Labor Force in South Africa and the Panel (average 1996–2006)
II.3. Results of the Third Decomposition
II.4. Production-Function Decomposition in South Africa
II.5. Comparison of the Saving to GNDI Ratios in South Africa and the Panel
II.6. Average Long-Term Contributions of the Explanatory Variables to the Private Saving Rate
II.7. Average Long-Term Contributions of the Explanatory Variables to the Private Saving Rate Decrease in South Africa
Figures
II.1. Contributions to GDP Growth
II.2 Contributions to GDP Growth (1996–2006)
II.3. Gross Capital Formation
II.4. Real Interest Rate
II.5. National Saving in South Africa
II.6. Saving Rates of the Public and Private Sectors
II.7. Saving Rates by Institutional Sector
III. Can Fiscal Policy Boost Growth and Employment in South Africa?
South Africa: Tax Summary as of June 2008
Figures
III.1. Scenario I: Macroeconomic Effects of a Fiscal Policy Package Aimed at Raising Output Growth
III.2. Scenario II: Macroeconomic Effects of a Fiscal Policy Package Aimed at Raising Output Growth and Employment