Trade, growth and distribution in the South African economy

This article examines the impact of changes in the volume and structure of trade on major macroeconomic variables, including growth in GDP, inflation, interest rates and the distribution of income. Five‐year projections are made using a nine‐sector, dynamic, computable general equilibrium (CGE) model Two simulations are considered, one in which growth in the mining sector is autonomously increased by 1 per cent and a second in which the nominal exchange rate is devalued by 3 per cent. CGE evidence supports the conclusion that an export‐oriented growth strategy which does not promote traditional exports will fail Collaborative macroeconomic policies are also necessary to ease the balance of payments constraint, but must be combined with more direct intervention in order to avoid significant deterioration in the distribution of income.

Notes

The authors are grateful for constructive comments from Nick Vink, Andre Roux, Craig McKenzie, Diane Flaherty and especially Lance Taylor and Stephen Gelb, who collaborated on an earlier version of the model. The comments of two anonymous referees are also gratefully acknowledged. All views expressed in this article are those of the authors and not the Development Bank of Southern Africa.