The South African Reserve Bank has published a Working Paper presenting NiGEM-SA, a new South Africa macroeconometric model built as part of the global National Institute Global Econometric Model (NiGEM) system. The model is positioned as an additional tool alongside the Reserve Bank’s existing suite, intended to support analysis of global spillovers and the cyclical impacts of climate-related shocks, with a more detailed representation of the financial sector. NiGEM-SA follows the standard NiGEM structure used across more than 60 countries and regions, with a detailed demand side and a supply side based on a constant elasticity of substitution production function that incorporates different energy sources (coal, gas, oil and non-carbon). The model includes Taylor-rule type monetary policy and exchange rate blocks and allows different expectations settings across agents and markets. A key extension is the explicit banking sector module, modelled using balance sheets, lending spreads, risk-weighted assets and capital adequacy dynamics to link credit conditions and bank regulation-type shocks to consumption, investment and output. Illustrative simulations include a temporary 1% ZAR/USD depreciation lasting two years (inflation rises by about 0.2 percentage points in the first year, with the policy rate increasing by about 25 basis points), a unilateral permanent US$5 per tonne increase in the carbon price (described as around a 50% increase versus a 2024/25 carbon tax of R190) that reduces coal energy consumption as a share of GDP by 7.35% by the end of the simulation period, and a 1 percentage point increase in required bank capital adequacy that lowers corporate loans by about 2 percentage points on average over the medium term and leaves GDP around 0.5 percentage points below baseline in the long run. The Working Paper is framed as preliminary research intended to elicit comments and stimulate debate, and the views expressed are those of the authors rather than South African Reserve Bank policy.
South African Reserve Bank 2025-06-23
South African Reserve Bank publishes working paper introducing the NiGEM-SA macroeconometric model with expanded financial sector and climate shock analysis
The South African Reserve Bank's Working Paper introduces NiGEM-SA, a new macroeconometric model for South Africa within the global NiGEM system. It aims to enhance analysis of global spillovers and climate-related shocks, featuring a detailed financial sector representation. The model includes a banking sector module linking credit conditions and regulatory shocks to economic outcomes, with simulations illustrating impacts of currency depreciation, carbon price increases, and changes in bank capital adequacy.