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Analysis of the Impact of Fiscal Policy on Economic Growth in South Africa: VECM Approach

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  • Tshembhani Mackson HLONGWANE
  • Itumeleng Pleasure MONGALE
  • Lavisa TALA

Abstract

Fiscal policy ensures macroeconomic stability as a precondition for growth at the macro level. This study investigates the impact of fiscal policy on economic growth of South Africa from 1960 to 2014 through a Cointegrated Vector Autoregression approach. It seeks to contribute to the existing literature as well as in designing effective fiscal policy programmes which can propel economic performance. Theresults of the long run estimates revealed that government tax revenue has a positive and significant long run influence on economic growth, whereas the government gross fixed capital formation and budget deficit have a negative impact on real GDP. For that reason, the study recommends that some expansionary fiscal policy measures should be strengthened since they play a very important role in the economy so as to meet the government target of the National Development Plan Vision for 2030.

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  • 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.
    • Handle: RePEc:rnd:arjebs:v:10:y:2018:i:2:p:231-238
    DOI: 10.22610/jebs.v10i2(J).2232
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    References listed on IDEAS

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    1. 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.
    2. Raymond Osi Alenoghena & Samuel David Adebisi & Ayobola Olufolake Charles, 2022. "Fiscal Policy and Macroeconomic Variables in Africa: A Bayesian VAR Approach," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 6(12), pages 731-741, December.
    3. Simbarashe Tendengu & Forget Mingiri Kapingura & Asrat Tsegaye, 2022. "Fiscal Policy and Economic Growth in South Africa," Economies, MDPI, vol. 10(9), pages 1-14, August.
    4. Fengsheng Chien & Ka Yin Chau & Talla M. Aldeehani & Pham Quang Huy & Luc Phan Tan & Muhammad Mohsin, 2022. "Does external debt as a new determinants of fiscal policy influence sustainable economic growth: implications after COVID-19," Economic Change and Restructuring, Springer, vol. 55(3), pages 1717-1737, August.

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