Macroeconomic resilience and GDP growth nexus: evidence from GDP growth dynamics in South Africa

Abstract This paper constructs the macroeconomic resilience index for South Africa, and examines the impacts of the index on GDP growth. In addition, we examine the role of the resilience index as a transmission channel in the economy’s reaction to an adverse economic shock. We estimate the linear regression and vector autoregression models using annual data spanning 2000–2019. Evidence indicates that improving the aggregate macroeconomic resilience index raises economic growth. Furthermore, forecast error variance decompositions indicate the estimated macroeconomic resilience index is a big driver of GDP growth over time. A counterfactual analysis reveals that the macroeconomic resilience index reduced the adverse effects of a crisis shock on GDP growth and amplified the recovery process. Amongst the seven dimensions of the index, it is mainly fiscal and monetary components that significantly neutralise the effects of an adverse crisis shock and amplify recovery than economic diversification, governance, external debt, external finance, and human resilience indices. This finding promotes the need for integrated action from the government and related authorities to improve macroeconomic resilience, as it has dragged economic growth post-2009.