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Is Fiscal Policy Sustainable in South Africa? An Application of the Econometric Approach

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  • Gauthier Tshiswaka-Kashalala

    (Department of Economics, University of Pretoria)

Abstract

The question of fiscal sustainability is very important for adequate macroeconomic management. This paper analyses the sustainability of the government of South Africa’s fiscal policies during the period 1990-2005 using quarterly data. It is found that government revenue, government spending on goods and services, and interest payment are non-stationary but cointegrated. A standard three-variable framework of Vector Error Correction (VEC) model is used to test whether data from the historical process in South Africa are consistent with the intertemporal government budget constraint. The present value constraint (PVC) approach was the main tool used in the empirical analysis. The findings suggest that the PVC hold over the sample period and point to the sustainability of the historical fiscal process.

Suggested Citation

  • Gauthier Tshiswaka-Kashalala, 2006. "Is Fiscal Policy Sustainable in South Africa? An Application of the Econometric Approach," Working Papers 200614, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:200614
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    References listed on IDEAS

    as
    1. Ahmed, Shaghil & Rogers, John H., 1995. "Government budget deficits and trade deficits Are present value constraints satisfied in long-term data?," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 351-374, November.
    2. Mr. Nigel A Chalk & Mr. Richard Hemming, 2000. "Assessing Fiscal Sustainability in Theory and Practice," IMF Working Papers 2000/081, International Monetary Fund.
    3. Robert A. Amano & Simon van Norden, 1995. "Unit Root Tests and the Burden of Proof," Econometrics 9502005, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Elvis Munyaradzi Ganyaupfu, 2014. "Fiscal Sustainability in South Africa: Recent Evidence," Journal of Social Economics, Research Academy of Social Sciences, vol. 1(4), pages 159-167.
    2. E. Calitz & S.A. du Plessis & F.K. Siebrits, 2014. "Fiscal Sustainability in South Africa: Will History Repeat Itself?," Studies in Economics and Econometrics, Taylor & Francis Journals, vol. 38(3), pages 55-78, December.
    3. Chin-Hong Puah Author_Email: chpuah@feb.unimas.my & Evan Lau & Hui-Fern Teo, 2011. "Testing Budget Sustainability In Sarawak State," 2nd International Conference on Business and Economic Research (2nd ICBER 2011) Proceeding 2011-221, Conference Master Resources.
    4. Dimitrios PAPARAS & Christian RICHTER & Alexandros PAPARAS, 2015. "A Synthesis of Empirical Research in the Sustainability of Fiscal Policy," Journal of Economics Bibliography, KSP Journals, vol. 2(4), pages 164-183, December.
    5. Owolabi A. Usman & Dauda Gbolagade Adebisi, 2017. "A Structural Break Analysis of Fiscal Deficit Process in Nigeria," The Review of Black Political Economy, Springer;National Economic Association, vol. 44(3), pages 341-352, December.
    6. Kojo Menyah & Yemane Wolde-Rufael, 2012. "Wagner'S Law Revisited: A Note From South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 80(2), pages 200-208, June.

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