Description
ECS3709 Assignment 3 Semester 2 2024 | Due September 2024. All questions answered.
Read the South African Reserve Bank Working Paper, “Identifying Supply and Demand Shocks
in the South African Economy, 1960–2020’’, which is written by Johannes W. Fedderke. The
link to this Working Paper is:
https://www.resbank.co.za/content/dam/sarb/publications/working-papers/2021/WP%202113.pdf
After reading the Working Paper, attempt the following questions:
Question 1
1. According to Fedderke (2021), “supply shocks have declined in magnitude and amplitude
since the 1990s, while demand shocks remain relatively prominent.” Using the AD-AS model,
illustrate graphically and explain how the temporary demand shocks, experienced during the
COVID-19 outbreak, affected the level of prices, output, and employment in South Africa.
Assume that there is no government intervention and no monetary policy response to restore the
economy to its initial equilibrium.
Question 2
2. Based on the Working Paper by Fedderke (2021), discuss any five limitations of the
Blanchard and Quah (BQ) identification strategy, which affect its theoretical coherence in
analysing the demand and supply shocks in South Africa.
Sholebabluch1985 –
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