A macroeconomic perspective of establishing a basic income grant
Adopting a broader perspective of the macroeconomics of basic income support, this podcast captures the dynamic feedback mechanisms and trade-offs between redistribution, social relief and debt accumulation in the South African economy. Inspired by research in the Basic Income Support Research Project entitled “The macroeconomics of establishing a basic income grant in South Africa”, ERSA’s […]
The macroeconomics of establishing a basic income grant in South Africa
Discussion Document 04 This paper offers a discussion on the macroeconomics of establishing a basic income grant. It uses a DSGE model to explore the feedback effects between macroeconomic factors pertaining to a basic income grant. Introducing such a grant raises consumption in poor households, but how would a permanent basic income grant be financed? […]
Technical background paper: The macroeconomics of establishing a basic income grant in South Africa
Working Paper 881 This paper quantifies the effect of fiscal transfers on the trade-off between social relief and debt accumulation, and discusses the economic growth and fiscal implications of different combinations of expanded social support and funding choices. Given South Africa’s already high level of public debt, the opportunity to fund a basic income grant […]
Prof. Nicola Viegi on SAMNet: a new economic modelling network is born
Adapting to the times, ERSA introduces its new initiative – the South African Modelling Network. In this podcast, Margaux G meets up with ERSA’s Deputy Director, Prof. Nicola Viegi who has been actively involved in this new initiative. To find out more about this and what inspired this, take a listen and explore the network.
A New Keynesian DSGE model for low income economies with foreign exchange constraints
The existing literature is clear that low income economies tend to suffer from foreign exchange shortages exacerbated by their exports. Most importantly, the concentration of their exports renders these countries susceptible to international price fluctuations. This frequently affects the level of foreign exchange, causing excess demand for foreign exchange leading to foreign exchange shortages. Using […]
The effectiveness of counter-cyclical loan-to-value regulations: generic versus sector-specific rules
This paper considers the implications of the counter-cyclical loan-to-value (CcLTV) regulation in a setting where different types of borrowers from distinct sectors of the credit market co-exist. To identify the optimal policy design, we consider two macro-prudential policy regimes, nanely generic and sector-specfi c, and compare their effectiveness in enhancing fi nancial and macroeconomic stability. […]
Fiscal policy and adjustment in a foreign exchange constrained economy: Evidence from Malawi
Most of the recent literature analysing the adjustments of macroeconomic variables to fiscal policy shocks rely on the inclusion of non-Ricardian households to generate a positive response of consumption to an increase in government spending. This paper examines the dynamic effects of government financing behaviour in a foreign exchange constrained low income economy on key […]
Is Basel III counter-cyclical: The case of South Africa?
This paper develops a dynamic general equilibrium model with banking and a macro-prudential authority, and studies the extent to which the Basel III bank capital regulation promotes financial and macroeconomic stability in the context of South African economy. The decomposition analysis of the transition from Basel II to Basel III suggests that it is the […]
Macroprudential policy and foreign interest rate shocks: A comparison of different instruments and regulatory regimes
This paper presents a generic small open economy real business cycle model with banking and foreign borrowing. We incorporate capital requirements, reserve requirements, and loan-to-value (LTV) regulation into this framework, and subject the model to a positive foreign interest rate shock that raises the country risk premium and reduces the supply of foreign funds. The […]
Flow specific capital controls for emerging markets
This paper investigates the impact of capital controls on business cycle fluctuations and welfare. To perform this analysis, we deploy an asymmetric two country model that is subject to negative foreign interest rate shocks. The results show that both an inflow and outflow capital control are able to attenuate capital flow dynamics, but each control […]
Welfare analysis of bank capital requirements with endogenous default
This paper presents a tractable framework with endogenous default and evaluates the welfare implication of bank capital requirements. We analyze the response of social welfare to a negative technology shock under different capital requirement regimes with and without default. We show that including default as an additional indicator of capital requirements is welfare improving. When […]
Credit market heterogeneity, balance sheet (in) dependence, financial shocks
This paper presents a real business cycle model with financial frictions and two credit markets to investigate the qualitative and quantitative relevance of credit market heterogeneity. To address this line of inquiry we contrast the transmission of financial shocks in an economy where loans are the only form of credit to one in which both loans and bonds […]
Monetary policy and commodity terms of trade shocks in emerging market economies
Commodity terms of trade shocks have continued to drive macroeconomic uctuations in most emerging market economies. The volatility and persistence of these shocks have posed great challenges for monetary policy. This study employs a New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model to evaluate the optimal monetary policy responses to commodity terms of trade shocks […]
The effectiveness of counter-cyclical loan-to-value regulations: generic versus sector-specific rules
This paper considers the implication of the counter-cyclical loan-to-value (CcLTV) regulation in a setting where different types of borrowers from distinct sectors of the credit market co-exist. To identify the optimal policy design, we consider two macro-prudential policy regimes, generic and sector-specific, and compare their effectiveness in enhancing financial and macroeconomic stability. We find that […]
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