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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 Limited, vol. 38(5), pages 604-618, September.
    • Handle: RePEc:eme:jespps:v:38:y:2011:i:5:p:604-618
    DOI: 10.1108/01443581111161841
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    Citations

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    Cited by:

    1. Francois J. Stofberg & Jan H. van Heerden & Heinrich R. Bohlmann, 2020. "A Fiscus for Better Economic and Social Development in South Africa," Working Papers 202072, University of Pretoria, Department of Economics.
    2. Canavire-Bacarreza, Gustavo & Martínez-Vázquez, Jorge & Vulovic, Violeta, 2013. "Taxation and Economic Growth in Latin America," IDB Publications (Working Papers) 4583, Inter-American Development Bank.
    3. Ibrahim Ayoade Adekunle & Sheriffdeen Adewale Tella & Oluwaseyi Adedayo Adelowokan, 2021. "Macroeconomic policy volatility and household consumption in Africa," SN Business & Economics, Springer, vol. 1(3), pages 1-22, March.
    4. Nouran Hussein & Jasmin Fouad, 2020. "When the Art of Macroeconomic Management Confronts the Evolution of Business Cycles: Zooming into the Egyptian Case," International Journal of Business and Management, International Institute of Social and Economic Sciences, vol. 8(1), pages 11-34, May.
    5. Ubi-Abai, Itoro & Ekere, Daniel, 2018. "Fiscal Policy, Monetary Policy and Economic Growth in Sub-Saharan Africa," MPRA Paper 91950, University Library of Munich, Germany.
    6. 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.
    7. Olufemi Samuel Adegboyo & Sunday Anderu Keji & Oluwadamilola Tosin Fasina, 2021. "The impact of government policies on Nigeria economic growth (case of fiscal, monetary and trade policies)," Future Business Journal, Springer, vol. 7(1), pages 1-14, December.
    8. Mohammed Ismaila & Lawrence Ehikioya Imoughele, 2015. "Behavioral Pattern of Fiscal Policy Variables and Effects on Economic Growth: An Econometric Exposition on Nigeria," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 5(2), pages 287-301, February.
    9. 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.
    10. Masood Ahmed Qazi & Syed Ammad, 2021. "Public investment efficiency and sectoral economic growth in Pakistan," Development Policy Review, Overseas Development Institute, vol. 39(3), pages 450-470, May.
    11. Odedoyin, Stephen, 2012. "Changing Fiscal Policy Actions, Economic Growth and Inflation in Nigeria, 1980-2009," MPRA Paper 94431, University Library of Munich, Germany, revised 20 Jul 2012.
    12. 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.
    13. Akanbi, Olusegun Ayodele, 2013. "Macroeconomic effects of fiscal policy changes: A case of South Africa," Economic Modelling, Elsevier, vol. 35(C), pages 771-785.
    14. Omoshoro-Jones, Oyeyinka Sunday, 2016. "A Cointegration and Causality Test on Government Expenditure –Economic Growth Nexus: Empirical Evidence from a South African Province," MPRA Paper 102085, University Library of Munich, Germany, revised 17 Oct 2017.
    15. Guivis Zeufack Nkemgha & Eric Mouchili Moumie, 2020. "Growth Effect of Fiscal Policy in Dependent Natural Resources Countries: Case of a Monetary Union," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 8(2), pages 96-105, June.
    16. Suleman Sarwar & Dalia Streimikiene & Rida Waheed & Ashwag Dignah & Asta Mikalauskiene, 2021. "Does the Vision 2030 and Value Added Tax Leads to Sustainable Economic Growth: The Case of Saudi Arabia?," Sustainability, MDPI, vol. 13(19), pages 1-20, October.
    17. Jamel JOUINI, 2018. "Measuring the Macroeconomic Impacts of Fiscal Policy Shocks in the Saudi Economy : A Markov Switching Approach," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 55-70, December.
    18. 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.
    19. 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.
    20. Abdullah Ali Al-Masaeed & Evgeny Tsaregorodtsev, 2018. "The Impact of Fiscal Policy on the Economic Growth of Jordan," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(10), pages 145-145, October.
    21. Stofberg, F.J. & van Heerden, J.H. & Horridge, M. & Roos, L., 2022. "A fiscus for better economic and social development in South Africa," Conference papers 333392, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    22. Tshembhani Mackson HLONGWANE & Itumeleng Pleasure MONGALE & Lavisa TALA, 2018. "Analysis of the Impact of Fiscal Policy on Economic Growth in South Africa: VECM Approach," Journal of Economics and Behavioral Studies, AMH International, vol. 10(2), pages 231-238.

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