A Simple Macroeconomic Framework for South Africa

This paper presents a number of policy experiments carried out within a modelling framework, which can be characterized as a merger of the financial programming and the revised minimum standard models, associated with respectively the International Monetary Fund and the World Bank. The baserun underlying the policy simulations is a six- year projection of the South African economy based on moderately optimistic assumptions about economic growth and the inflow of foreign capital. It clearly transpires that the choice of financing source of expanded government activity can matter a great deal for economic outcomes, and also changes in the composition of government spending can affect real output and other macroeconomic variables. Yet, the framework is ill-suited to analyze policies for export promotion.