Abstract
In a highly integrated world, an emerging economy such as South Africa cannot insulate itself from crisis. It can, however, strengthen those forces that mitigate external shocks. We develop an analytical framework to study the transmission mechanisms of a global crisis to an individual economy and then analyse how the South African economy was affected by the Lehman crisis. We consider both pure economic aspects, such as trade, employment, and fiscal policies, as well as governance aspects, among them economic freedom and corruption. We show specifically how structural factors mediate the intensity of business cycle fluctuations following a crisis. This is followed by an assessment of South Africa’s readiness to manage a potential future crisis.
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Notes
- 1.
See also Claessens et al. (2010).
- 2.
See Freytag (2010) for a detailed analysis.
- 3.
The policies in Germany and the USA with respect to the car industry show the importance of this condition: Whereas the “cash-for-clunkers” program in the USA was restricted to American brands, the according program in Germany was applied to new cars of all bands. As a consequence, a Romanian producer experienced the highest sales growth (starting from a very low base) in Germany of all car producers in the world.
- 4.
The Harvard Group was a group of leading economists from Harvard, who in 2006, jointly with South African colleagues, wrote a number of economic policy-oriented studies on South Africa; see also https://www.hks.harvard.edu/centers/cid
- 5.
See also the contributions in Parsons (2009).
- 6.
- 7.
Subsequent political and economic problems in South Africa are of structural nature and not caused in the world economy but by the government. These problems are not the subject of this chapter. See the analysis of the weak postcrisis recovery in the chapter by Boshoff and Becker (2020).
- 8.
According to the Fraser Institute, a country is defined as economically free, if the index exceeds 7.5.
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Freytag, A. (2020). The Role of Institutional Structure in Mediating the Impact of the Financial Crisis on the South African Business Cycle. In: Boshoff, W. (eds) Business Cycles and Structural Change in South Africa. Advances in African Economic, Social and Political Development. Springer, Cham. https://doi.org/10.1007/978-3-030-35754-2_5
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