Abstract:
The substantial change in South Africa’s trade patterns over the past two decades has
affected the impact of economic shocks in major world economies on South Africa. To investigate the
effect, we use a global vector autoregression (GVAR) model with time-varying trade weights to account
for changing international trade linkages. We show that the long-term impact of a shock to Chinese
GDP on South African GDP is much stronger in 2009 than in 1995, due to the substantial increase in
South Africa’s trade with China since the mid-1990s. At the same time, the importance of the U.S.
economy to South Africa diminished considerably. The results indicate one of the possible reasons why
the recent global crisis did not affect South Africa as much as it affected developed economies. It also
stresses the increased risk, to the South African and other economies, should China experience slower
GDP growth.
