The determinants of growth in the South African economy: CVAR analysis

The key to a brighter future for South Africa is a sustained growth which requires an on-going improvement in the supply side of the economy. The purpose of this paper is to identify the set of variables that may potentially act as determinants of growth in the South African economy with the application of the cointegrated vector autoregressive approach. Impulse Response Function is also used to explain the response to shock amongst the variables. The results indicate that the underlying variables of our model; real GDP, export, import and infrastructure investment are cointegrated. The estimates indicate that all the variables influence growth, albeit positive or negative effects. These results provide some indication to the policy makers on which variables to focus on in order to stimulate economic growth in South Africa. The study will contribute to a body of knowledge about the growth suggestions and recommendations that can redesign the growth promotion programs