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Fiscal sustainability in South Africa: Will history repeat itself?

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Author Info

  • Estian Calitz

    ()
    (Department of Economics, University of Stellenbosch)

  • Stan du Plessis

    ()
    (Department of Economics, University of Stellenbosch)

  • Krige Siebrits

    ()
    (Department of Economics, University of Stellenbosch)

Abstract

Several empirical studies have found that fiscal policy has been sustainable in South Africa since 1960. This paper complements these studies by providing perspective on the manner in which fiscal sustainability was maintained. It discusses two episodes of significant increases and one period of substantial reduction in the public debt burden to show that periods of rising deficits and government debt in South Africa were followed by returns to sustainable levels, thereby preventing major domestic economic crises and external interventions. The paper also provides a projection of the fiscal outlook for South Africa based on a structural VAR model. The results suggest that the discretionary fiscal decisions of 2007 to 2010 might pose a serious threat to the sustainability of fiscal policy unless the authorities respond as they did in the past by checking large budget deficits and concomitant rapid increases in the public debt burden promptly.

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File URL: http://www.ekon.sun.ac.za/wpapers/2013/wp072013/wp-07-2013.pdf
File Function: First version, 2013
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Bibliographic Info

Paper provided by Stellenbosch University, Department of Economics in its series Working Papers with number 07/2013.

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Date of creation: 2013
Date of revision:
Handle: RePEc:sza:wpaper:wpapers183

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Keywords: fiscal policy; fiscal sustainability; South Africa;

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  1. Stan du Plessis & Willem Boshoff, 2007. "A fiscal rule to produce counter-cyclical fiscal policy in South Africa," Working Papers 13/2007, Stellenbosch University, Department of Economics.
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