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The link between government expenditure and debt as potential drivers of economic growth in South Africa

Author

Listed:
  • ABIGAIL STIGLINGH

    (NORTH-WEST UNIVERSITY)

  • LERATO MOTHIBI

    (NORTH-WEST UNIVERSITY)

Abstract

The financial burden of public debt in the lives of South Africans has undergone considerable change and continues to evolve since the beginning of democracy in 1994. Many countries, specifically the OCED countries have experienced expanding levels of debt to GDP ratio since the global financial crises in 2008/2009, where South Africa?s gross debt ratio averaged 44.8% in 2017. Making use of the autoregressive distributive lag model (ARDL), the study utilises data from 1980 to 2017 in order to investigate the relationship between government expenditure and debt as potential drivers of economic growth. Furthermore, the study?s aim is to identify weather or not government expenditure and debt could be identified as positive or negative contributors towards economic growth in South Africa. The study further seeks to identify the link between government expenditure and debt since, government expenditure in South Africa has diligently surpassed its revenue, where the deficit is in most cases is funded through the accumulation of unsustainable debt. The findings of the study reveal a negative relationship between economic growth and government expenditure. In addition, the study also reveals a positive relationship between economic growth and government debt. This therefore indicates the need for stricter government expenditure and debt management policies, as unsustainable debt levels and unregulated government expenditure could be detrimental for the South African economy.

Suggested Citation

  • Abigail Stiglingh & Lerato Mothibi, 2019. "The link between government expenditure and debt as potential drivers of economic growth in South Africa," Proceedings of International Academic Conferences 9912043, International Institute of Social and Economic Sciences.
    • Handle: RePEc:sek:iacpro:9912043
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    More about this item

    Keywords

    ARDL model; economic growth; government expenditure; debt.;
    All these keywords.

    JEL classification:

    • D00 - Microeconomics - - General - - - General
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • A10 - General Economics and Teaching - - General Economics - - - General

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