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The macroeconomic effect of fiscal policy in South Africa: A narrative analysis

Author

Listed:
  • Tumisang Loate
  • Romain Houssa
  • Nicola Viegi

Abstract

This paper analyses the macroeconomic effect of legislated personal income tax changes in South Africa over the 1996-2019 period. We identify personal income tax shocks using a narrative approach and incorporate these shocks in a proxySVAR model. Our analysis shows that permanent changes in personal income taxes have a larger and significant effect on output through both the investment and consumption channels. We also find that personal tax cuts have a persistent effect on output through the investment channel in the 1996-2010 sub-sample.

Suggested Citation

  • Tumisang Loate & Romain Houssa & Nicola Viegi, 2021. "The macroeconomic effect of fiscal policy in South Africa: A narrative analysis," WIDER Working Paper Series wp-2021-156, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2021-156
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Personal income tax; Structural VAR; Instrumental variable; Macroeconomics; South Africa; Fiscal policy; Output;
    All these keywords.

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