Trends and Determinants of Output Growth Volatility in South Africa

Fatima Bhoola, Uma Kollamparambil

Abstract


Notwithstanding the recent financial crisis, many industrial countries have experienced a significant decline in macroeconomic volatility characterised by less volatile output growth over the last three decades. Literature refers to this decline as the ‘great moderation and though there is no consensus on the possible cause, scholars consistently attribute it to three main factors: Improvements in macroeconomic policy, implementation of better inventory management and to the so called ‘good luck’ hypothesis. The aim of this paper is to observe the trends and determinants of output growth volatility in South Africa. The study indicates that South Africa experienced a significant structural break in the early 1990s in output growth. Further investigation, into the possible causes, reveals that monetary policy contributed significantly to the falling volatility of output growth.


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International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)

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