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Analysing the Effects of Fiscal Policy Shocks in the South African Economy

  • Charl Jooste

    ()

    (Department of Economics, University of Pretoria)

  • Guangling "Dave" Liu

    ()

    (Department of Economics, University of Stellenbosch)

  • Ruthira Naraidoo

    ()

    (Department of Economics, University of Pretoria)

This paper is the first one to analyse the effect of aggregate government spending and taxes on output for South Africa using three types of a calibrated DSGE model and more data driven models such as a structural vector error correction (SVEC) model and a time-varying parameter VAR (TVP-VAR) to capture possible asymmetries and time variation of fiscal impulses. The impulse responses indicate first, that increases in government expenditure have a positive impact, albeit (at times) less than unity, on GDP in the short run; second, over the long run, the impact of government expenditure on GDP is insignificant; and third, increases in taxes decreases GDP over the short run, while having negligible effects over longer horizons.

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Paper provided by University of Pretoria, Department of Economics in its series Working Papers with number 201206.

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Length: 27 pages
Date of creation: Feb 2012
Date of revision:
Handle: RePEc:pre:wpaper:201206
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Web page: http://www.up.ac.za/economics

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