(Non-technical Summary 10)
"The Feasibility of Compiling Wealth Estimates for South Africa.”
Aron, J., J. Muellbauer and J. Prinsloo (S.A. Reserve Bank)
(work-in-progress)
•
Neither the South African Reserve Bank (SARB) nor other government statistical
agencies publishes balance sheet wealth estimates for South Africa on a market value
basis, of the type produced by US Federal Reserve Board, the Bank of England and
the Office of National Statistics in the UK, and comparable organisations in Japan
and elsewhere.
•
The first coherent set of aggregate personal sector wealth estimates at market value
were constructed for South Africa at a quarterly frequency in Aron & Muellbauer.
"Estimates of Personal Sector Wealth for South Africa.” CSAE WP Series no.17,
1999.
•
These wealth estimates have a key role in explaining variations in consumer
expenditure in South Africa from 1970 (see Aron & Muellbauer. "Financial
Liberalisation, Consumption and Debt in South Africa.” CSAE WP Series no.22,
2000); and the behaviour of broad money aggregates (see Aron & Muellbauer.
“Wealth, Financial Liberalisation and the Demand for Broad Money in South Africa”,
2003).
•
Such aggregates should be important components in macro-models used by the
SARB to forecast inflation and other economic indicators, which inform interest rate
setting policy under inflation targeting.
•
It would thus be highly desirable for the Reserve Bank itself to construct and publish
market value wealth estimates. The effort to do so is likely, for some assets, to
improve the accuracy of the flow of funds estimates. The wealth estimates could be
used in modelling consumption and the demand for money; and thus serve to focus
the attention of policy-makers on the macroeconomic wealth effects of interest rate
policy and fiscal policy, which previously have not been fully appreciated.
•
This joint paper with the S.A. Reserve Bank will explore the feasibility of introducing
wealth estimates into the SARB database, in consultation with the Office of National
Statistics, U.K.. It will compare and contrast methods and data sources in the two
countries. There are potential implications for the improvement of existing surveys in
South Africa.
•
For historical analyses and modelling, these data could be spliced to the constructed
estimates by Aron and Muellbauer, 1999.