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Impact of Fiscal Consolidation on Government Debt in South Africa: Evidence to Structural and Cyclical Effect

Author

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  • Eugene Msizi BUTHELEZI

    (University of Free State)

Abstract

The purpose of this paper is to examine the fiscal consolidation impact on government debt in South Africa (SA) looking at both structural and cyclical effects. The paper employs the Structural Vector Autoregression (SVAR) using time-series data from 1990 to 2020 in South Africa. The key contribution of the paper is it with a focus on the effect of fiscal consolidation as well as investigation of the structural and cyclical component effect of government expenditure cut as well as a tax increase in a developing economy like South Africa. We found that government debt falls as of the result of fiscal consolidation achieved through government expenditure cut. The fiscal consolidation of tax increases is better than based on government expenditure cut. The cyclical component of government expenditure increases domestic government debt. This is also found in the structural government expenditure results in an increase in domestic government debt.

Suggested Citation

  • Eugene Msizi BUTHELEZI, 2023. "Impact of Fiscal Consolidation on Government Debt in South Africa: Evidence to Structural and Cyclical Effect," Journal of Economics and Financial Analysis, Tripal Publishing House, vol. 7(2), pages 1-23.
    • Handle: RePEc:trp:01jefa:jefa0065
    DOI: 10.1991/jefa.v7i2.a60
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    More about this item

    Keywords

    Fiscal Consolidation; Structural and Cyclical Fiscal Consolidation; Government Debt.;
    All these keywords.

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H76 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other Expenditure Categories
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts

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