Original Research

Macroeconomic implications of uncertainty in South Africa

Theshne Kisten
South African Journal of Economic and Management Sciences | Vol 23, No 1 | a3350 | DOI: https://doi.org/10.4102/sajems.v23i1.3350 | © 2020 Theshne Kisten | This work is licensed under CC Attribution 4.0
Submitted: 15 August 2019 | Published: 18 February 2020

About the author(s)

Theshne Kisten, Department of Economics, Faculty of Economics and Management Science, University of Pretoria, Pretoria, South Africa


Aim:This article explores the extent to which economic policy uncertainty (EPU) influences selected macroeconomic variables in South Africa (SA).

Methods: To this end, I construct a constant parameter vector autoregressive (VAR) model and a time-varying parameter (TVP) VAR model, where the latter model evaluates if the impact of uncertainty on the macroeconomic variables has changed over time.

Setting: The models are estimated using quarterly South African data over the period 1990 to 2015, which include industrial production growth, consumer price inflation, 10-year government bond yield, real effective exchange rate, and economic policy uncertainty. Cholesky ordering of the variables are imposed to recover the orthogonal shocks.

Results: The results of the constant parameter VAR model suggest that an unanticipated positive shock to the uncertainty index results in a decline in industrial production and real effective exchange rate, while fostering an increase in the general price level and 10-year government bond yield. Time-varying impulse responses show that the impact of uncertainty shocks on the selected macroeconomic variables has declined systematically over time. This is perhaps intuitive as the new unanticipated information is gradually picked up by media over time and incorporated into rational agents’ decision-making.

Conclusion: The transmission of a positive uncertainty shock to the real economy has time-varying implications.


uncertainty; South Africa; VAR; time-varying; macroeconomic.


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Crossref Citations

1. The impact of uncertainty shocks in South Africa: The role of financial regimes
Mehmet Balcilar, Rangan Gupta, Theshne Kisten
Review of Financial Economics  vol: 39  issue: 4  first page: 442  year: 2021  
doi: 10.1002/rfe.1120