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Fiscal policy and economic growth in South Africa

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  • Matthew Kofi Ocran

Abstract

Purpose - This paper aims to examine the effects of fiscal policy associated with increases in government expenditures, tax revenue and budget deficit on the South African economy. Design/methodology/approach - Structural VARs based on the Blanchard-Quard decomposition identification scheme were used in the empirical analysis. With the aid of quarterly data covering the period 1990:1 to 2008:4, the identified true models are used to estimate various impulse-response functions. The impulse-response functions represent the responses of real output and interest rates to shocks from tax revenue, budget deficit and government consumption and investment expenditures. Findings - The results suggest that the fiscal policy instruments have varied effects on output and interest rates. The effect of the fiscal policy on output appears to be quite modest but persistent; however, the response from interest rate is temporary and substantial most cases. Originality/value - The debate on the efficacy of fiscal policy in stimulating growth seems to have assumed new prominence in the wake of the recent global financial crisis. This paper contributes to the discourse from a South African focused empirical effort. Other fiscal policy authorities may find the paper valuable.

Suggested Citation

  • Matthew Kofi Ocran, 2011. "Fiscal policy and economic growth in South Africa," Journal of Economic Studies, Emerald Group Publishing, vol. 38(5), pages 604-618, September.
  • Handle: RePEc:eme:jespps:v:38:y:2011:i:5:p:604-618
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    Citations

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    Cited by:

    1. Gustavo Canavire-Bacarreza & Jorge Martínez-Vázquez & Violeta Vulovic, 2013. "Taxation and Economic Growth in Latin America," IDB Publications (Working Papers) 4583, Inter-American Development Bank.
    2. Syed Ammad Ali & Qazi Masood Ahmed & Lubna Naz, 2016. "Public spending on human capital formation and economic growth in Pakistan," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 23(1), pages 1-20, June.
    3. Alicja Sekula & Joanna Smiechowicz, 2016. "Systems Of General Grants For Local Governments In Selected Eu Countries Against The Background Of The General Theory Of Fiscal Policy," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 11(4), pages 711-734, December.
    4. Muhammad Irfan Javaid Attari & Roshaiza Taha & Muhammad Imran Farooq, 2014. "Tax Revenue, Stock Market and Economic Growth of Pakistan," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 5(5), pages 136-148, October.
    5. Olorunfemi Yasiru ALIMI & Olumuyiwa Ganiyu YINUSA & Ishola Rufus AKINTOYE & Olalekan Bashir AWORINDE, 2015. "Macroeconomic Effects of Fiscal Policy Changes in Nigeria," The Journal of Accounting and Management, Danubius University of Galati, issue 3, pages 85-94, December.
    6. Mthokozisi Mlilo & Umakrishnan Kollamparambi, 2016. "Fiscal policy, employment, and output in South Africa: An open economy analysis," Journal of Economic and Financial Studies (JEFS), LAR Center Press, vol. 4(3), pages 11-23, June.

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