(1996), “Taxati, Folster, S. and M. Henrekson (2001), ‘Growth Effects of Gov, Fu, D., Taylor, L.L. Journal of Economic Development and Control, ), International financial statistics, CD Rom, Washington, D.C.: In, Ferretti, G. M. and Roubini, N., (1998), “Growth effects of income and co, Tax, Dept and Expenditures Policies in a Growing. Is the evidence consistent with the predictions of endogenous growth models that the structure of taxation and public expenditure can affect the steady-state growth rate? Furthermore, a part of revenue forecast errors can be explained by random shocks to the economy. This position is due to the assumption that all tax, while one group of taxes such as those on savings, R&D, prof, deemed to have direct impact on the growth prospects, regarded as inconsequential to growth. Unfortunately, on the long term, the impact of these measures hasn’t always been a favorable one due to its collateral effects. private sector then we are faced with an overall negative growth effect (Araujo and Martins, 1999). The fiscal policy variables considered in … Fiscal policy in South Africa achieves significant reductions in income inequality and poverty— the largest among the emerging-market countries so far included in the CEQ project. ; World Bank. Distributional Impact of Fiscal Policy in South Africa. In a creative synthesis we have assigned the relevant literature to the twelve introduced policy variables. This study analyze the effects of fiscal deficit on sustainability of economic growth and provided new empirical evidence on the effects of fiscal deficit on saving and sustainability of economic growth based on the assumption of endogenous growth model. Much previous research needs to be re-evaluated because it ignores the biases associated with incomplete specification of the government budget constraint. On the cont, The proponents of the classical view assert that the effect of government spending is, temporary and not effective particularly in the long. The data used in the study cover the period 19, account for government spending (GOVSPEND); gross fixed c, government is used to account for investment expenditur, government deficit or surplus. La problématique du stress professionnel s’inscrit dans un champ d’études pluridisciplinaire. International Trade, University of Nottingham. including transfers to poor, ence care and foster care grants respectively. Various measures of direct taxes are used to see whether their impact on growth is different. The findings reveal that tax revenue is positively related to economic growth. new democracy in 1994 has to make way for a more interventionist approach. Secondary data sourced from Central Bank of Nigeria (CBN) (2016) were analysed. interest rate is small in magnitude and short in time horizon. Expenditure. After, 1960s to 32% in the 1980s it started climbing up in the, 1994 period returned fiscal management to 1960s debt levels. Transylvanian Review of Administrative Sciences. Scroll over a bubble to see the GDP growth rate and the year in question. In recent time however, people have gone a step, further to disaggregate consumption into what has b, unproductive government expenditure following Devarajan et al (, is that while certain consumption expenditures particularl. All rights reserved. We employ historical data, recent cross-section data and newly constructed public investment series. In the case of consumption growth shock, growth response is ambiguous nevertheless the response returns to equilibr, increases in tax and consumption are small in size and tend to move towards the, equilibrium within 10 quarters. The Chapter 3 investigates whether income inequality matters in the periods of fiscal adjustments in Côte d’Ivoire over the period 1980-2014. In general, the policy of fiscal prudence after 1994 resulted in a substantial decline in debt service cost, whilst the real growth rate of … Les recherches relatives à ce domaine montrent que les bonnes conditions de travail contribuent au bien-être des travailleurs et à la performance de l’entreprise. disputed in the mainstream growth literature could be due to the, When expenditure is considered it is observed that while c, aggregate government expenditure as a single variable others have said that t, separately. can have a possible favourable effect on long term growth. For instance debt as a percentage of GDP has, 5.4% as a proportion of GDP between 1990 and 1993 wa, ficit to GDP ratio in the 1960s. South African fiscal policy achieves the largest reductions in poverty and inequality of the 12 countries studied. and Gemmel, N. Kukk, K. (2008), Fiscal policy effects on economic growth: Short. Gross fixed capital formation from government also has a positive impact on output growth but the size of the impact is less than that attained by consumption expenditure. The purpose of this paper is to investigate the effects of tax reform on entrepreneurship in South Africa using repeated cross-sectional data from the World Bank. The si, expenditure to account for fiscal policy stance include Barro, spending, so crowding out is complete (Dornbusch et. Moreover, these reductions are the largest achieved in the emerging market countries that have so far been included in the Commitment to Equity project. The outcome supports four key conclusions. Theoretically, private incentive to invest but a lump sum tax does not, denote parameters in the utility function. It was found that the defence expenditure, distortionary taxation, and budget balance are significantly and negatively related to real per capita GDP. The response of output growth to increases i. These categories should then be, Glomm and Ravikumar (1997) demonstrate that investment and edu, could foster growth or types of consumption spending can be growth, Nonetheless, Zagler and Durneker (2003) concede that while certain pub, When it comes to research and development (R&D) expenditures provided by the, neutral and distortionary. Purpose Risks to the fiscal consolidation remain elevated. Consequently, we follow, regressive (VAR) technique in the empirical, the level and growth rates of output. Blog by Willemien Viljoen (tralac) - 13 May 2020. The authors use individual-level data to measure the effectiveness of a tax reform policy on entrepreneurship. growth in South Africa over the past few decades. Design/methodology/approach And in regard to the fiscal policy, the author calculates an initial government spending multiplier of 0.20, which later peaks at 0.40. The growth in output hit the highest point by quarter 3 and then returns to, equilibrium over the next 27 quarters. The impulse response drops after the 5, onse is very small. Commitment to Equity (CEQ) Working Paper Series from Tulane University, Department of Economics. A contrary view is espoused by Lin (2000) and others who t. public debt do not necessarily reduce growth. First, government consumption expenditure has a significant positive effect on economic growth. The purpose of this paper is to review some of the recent developments in endogenous growth models. The significance of fiscal arrangement radiates from the way that open spending is viewed as the prime drive for financial movement of a nation by affecting the dimension of total interest and subsequently monetary development. In addition to the fi, market with reduced intervention and a considerable, (Easterly and Ribero, 1993; Mauro, 1995; Folster and, On the other hand, there is also the view that governments are inherently, ution of fiscal policy stance over the study period. More conclusive econometric work for South Africa on how this spending affects economic growth would allow a better modelling of public spending and thus a better understanding of their impact on the economy. Yet despite fiscal policy being both equalizing and poverty-reducing, the country’s inequality and poverty Levine, R. Renelt, D. (1992), “A sensitivity analysis. Fiscal approach assumes a huge job in a monetary arrangement because of its capacity to acknowledge objectives went for by a national economy. Nous présentons dans cet article, une étude sur les facteurs et les conséquences du stress sur les travailleurs des entreprises de la commune de Bejaia. Gabriela Inchauste (), Nora Lustig (), Mashekwa Maboshe, Catriona Purfield and Ingrid Woolard () . These results suggest that temporary and well-targeted programs should be implemented to help those being left out by the growth process. The fiscal policy variables considered in the study include government gross fixed capital formation, tax expenditure and government consumption expenditure as well as budget deficit. If a given shock gener, to its previous equilibrium value of zero after some period then it i, and permanent if the response path does not return to the initi, each of the variables (output, interest rate, tax and co, is observed that the response to own shock (self response), 15 quarters with consumption having the shortest time path as equilibrium is attained after, about 15 quarters. What has become increasingly acceptable is the division of government, growth while the latter impedes growth. The latter revolves around four chapters on fiscal policy issues and inclusive growth-related matters. The r, quarter. 1998 Medium Term Budget Policy Statement 32 ♦ reduce government consumption spending as a share of national income. Chapter 1 explores how government tax policy affects the inclusiveness of growth in developing countries. The role of fiscal policy in stabilising the South African economy cannot be underestimated given thabout 3at 0 per cent of aggregate domestic demand comes from government consumption expenditure and about 95 per cent of this expenditure is financed through tax revenue. All rights reserved. By intertemporal model we mean a multi-period model in which results are computed simultaneously for all periods rather than computed one-period-at-a-time. Understanding the effects of fiscal policy on South Africa Increased investment spending would decrease the national debt of the country as a percentage of its Gross Domestic Product, reduce government deficit and improve the economic health of the country, says Margaret Chitiga-Mabugu. Impact of Taxation on Economic Growth in an Emerging Country, THE ROLE OF FISCAL POLICY IN ACHIEVING ECONOMIC STABILITY IN, Fiscal Policy and Growth of Real Economic Activities in Nigeria (1980-2016), Fiscal policy, income inequality and inclusive growth in developing countries, Les Cahiers du CEDIMES Les Cahiers du CEDIMES, WHEN THE ART OF MACROECONOMIC MANAGEMENT CONFRONTS THE EVOLUTION OF BUSINESS CYCLES: ZOOMING INTO THE EGYPTIAN CASE, Monetary and fiscal policy effects in South African economy, Effectiveness of Tax Reform on Entrepreneurship, Taxation As a Catalyst/ Deterrent For Economic Growth In South Africa, The Composition of Public Expenditure and Economic Growth, Government Spending in a Simple Model of Economic Growth, Productive Government Expenditure and Long Run Growth, Growth Elects of Government Expenditure and Taxation in Rich Countries, Growth Effects of Government Expenditure and Taxation in Rich Countries: A Reply, Fiscal Policy and Growth: Evidence from OECD Countries, Fiscal Policy and Economic Growth: An Empirical Investigation, Possibilities and limitations of fiscal policy in croatia, The Fiscal Policy as Growth Engine in EU countries. Thus, the process that public revenues carry out, as referred to earlier, relies directly on the volume of public revenues of the government. A number of cross-country comparisons do not find a robust negative relationship between government size and economic growth. The, to shocks from government consumption expenditure is negati, of investment to shocks from interest rate changes, The impulse response of changes in government consumption expenditu. Thus in addition to the growth indicator for South Africa. Second, for these elements, fiscal policy in South Africa achieves appreciable reductions in income inequality and poverty. Similarly, the deficit level that, Consumption expenditure by government has also increa. Increased investment spending would decrease the national debt of the country as a percentage of its Gross Domestic Product, reduce government deficit and improve the economic health of the country, says Margaret Chitiga-Mabugu. It appears therefore that, The paper sought to examine the relationship between a selection of fi, individually the effects of government consumption and investment expenditure, defici, tax receipts on economic growth respectively. from a South African focused empirical effort. In addition, our result shows that there is an optimal tax beyond which, any increase in the personal income tax rate should have negative impact on inclusive growth. The unit root test resul, the natural logarithms of all the variables under c, tax, deficit and investment. Purpose The shocks are then normalized to one standard deviation o. the structural form disturbances in the VAR system. 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Using data from 43 developing countries over 20 years we show that an increase in the share of current expenditure has positive and statistically significant growth effects. There is also debate about taxation as a, overnment engages in any spending that is less productive as compared to that of the, generation strand of the literature on fiscal p, iscal indicators better illustrate a series of fiscal polic, analysis using a various specifications produces a plausible stable result that lends, literature on the endogenous growth theory maintains, white noise error terms. However, the size of the deficit seems to have no significant impact on, The results of the study stand in sharp contrast to stu, the work of Fu et al, 2003. The response of output changes to own, shocks takes as twice the time required for own response in c, Considering the innovations from interest rate shocks, the response o, shocks generated by innovations in tax increases, growth. These risks are associated with the macroeconomic outlook, budget execution, policy uncertainty and financially distressed state-owned companies. International Journal of Economics and Financial Issues. © 2008-2020 ResearchGate GmbH. Author: Professor Margaret Chitiga-Mabugu, Executive Director, Economic Performance and Development, HSRC, This article is based on a shortened version of Impact of fiscal policy in an intertemporal CGE model for South Africa, by Ramos Mabugu, Veronique Robichaud, Helene Maisonnave and Margaret Chitiga. Yet other researc, economic view which says that “with every dollar increase in real government spending is, al, 1998 as quoted in Kukk, 2008). South Africa is facing an ‘A-grade crisis’ as it grapples with the impact of the coronavirus and its own weak economy, says chief economist at the Efficient Group, Dawie Roodt. Ainsi, ces entreprises accusent un retard significatif sur la question de la prévention de ce risque professionnel. This paper, published uses the 2010/11 Income and Expenditure Survey for South Africa to analyze the progressivity of the main tax and social spending programs and quantify their impact on poverty and inequality. In total, the outputs will slowdown. Contractionary fiscal policy is seen as when government spending grows at a slower rate than the previous year/or has decreased. increase in consumption expenditure following the end of apartheid, it is wo, population. By taking this approach, major contributions to existing literature on the transmission mechanism of fiscal policy in African economies are made. The results also fail to confirm the hypothesis that external shocks have a very profound effect on South African monetary and fiscal policies. possibilities of stabilizing role of fiscal policy by analyzing the impact of general government revenues and expenditures on GDP growth. Due to the equivalence of some policy variables we are left with six degrees of freedom, where we need four to internalize the model’s intrinsic externalities, leaving two instruments to conduct short run fiscal policy. One of the vehicles for this activity is its widely distributed quarterly news magazine, the HSRC Review, which contains accessible articles of recent research outputs, success stories of collaborative projects, and projects involving capacity development at community level. Gross fixed, capital formation from government also has a positive impact on output growth but the size, of the impact is less than that attained by consumption expenditure. has most explanatory power for productivity. We also see, interest rates, investment and deficit. Agell et al. On the contrary, the impulse response of output growth to shocks f, shooting. Some of these studies inclu, The literature review amply demonstrates that no single, fiscal policy stance, however, as suggested by Fu, itself to interpretation. This paper considers the relationship between aggregate productivity and stock and flow government-spending variables. South Africa’s trade for March 2020 – significant trade surplus shows the initial impact of COVID-19 on imports. Lastly, Chapter 4 assesses the credibility of fiscal forecasts and their social effects in CEMAC and WAEMU countries. London: Centre for Policy, composition of public spending and economic performa, Devarajan, S.V., Swaroop, V. and Zhou, H., (1996), “The composition of publ. Fiscal Policy and Economic Growth in South Africa, Department of Economics, University of Fort H, Centre for the Study of African Economies “Conference on, St. Catherine’s College, Oxford University, UK. Noting that the literature has focused on the link between the level of public expenditure and growth, we derive conditions under which a change in the composition of expenditure leads to a higher steady-state growth rate of the economy. In terms of output growth response to, consumption is almost immediate hitting a peak by the, dies out after a relatively shorter period, of changes in interest rate and consumption to, ut, interest rate, investment as well as own shocks is negative. The. The analyses co, The outcome supports four broad conclusions. This paper describes the empirical regularities relating fiscal policy variables, the level of development, and the rate of growth. However, increased spending translates into greater debt, which might not be sustainable in the long run. Mabugu, R., Robichaud, V., Maisonnave, H. & Chitiga, M. (2013) Impact of fiscal policy in an intertemporal CGE model for South Africa. The response is a, re, the impulse response of output growth, shooting is around 1%. The impulse response reach, instances; though the impulse response is temporary it is persistent. and Marins, M. A. C., (1999), “Economic growth with finite lifetimes”. The author shows that monetary tightening leads to a fall in real economic activity and depreciates the exchange rate. In this short paper it is argued that their critique is unfounded. Downloadable! The fiscal policy va, government gross fixed capital formation, tax expenditure and government, expenditure as well as budget deficit. Presently, more than 13 million of the population (27%), social grant or the other. Findings Aim: This article primarily focuses on studying whether Swaziland’s fiscal policy … The results point out the fact that a rather small dimensioned public sector positively influences economic growth, just like productive investments do, as opposed to non-productive investments. We present a unifying framework for the analysis of long run growth implications of government expenditures and revenues. Some studies on developing countries found non-consensual clear relationships, namely those by Skinner (1988); Easterly and Rebelo (1993); Agell et al. No. The empirical findings show that government revenues and gross fixed capital formation have a significant positive long-run impact on economic growth in South Africa. To the best of our knowledge, no published study has empirically analysed the macroeconomic effects of fiscal policy in the context of an open, middle-income sub-Saharan African economy like South Africa, using an intertemporal model that quantifies the implications of sectoral and temporal linkages, which are crucial for understanding the effects of fiscal policy. Therefore, these errors in revenue forecast considered as fiscal policy shocks has a detrimental effect on inclusive growth. Mauro, Paolo (1995), ‘Corruption and Growth’, Martin, R. and Fardmanesh, M. (1990), “Fisc, Morales, M. F., (2001) Research Policy and Endogenous Growth, Universitat Auto`noma, M’Amanja, D. and Morrisey, O., (2005), Fiscal policy and economic growth in, CREDIT Research Paper, No. Therefore it c, of innovations that does not depend on the VAR or, Consequently, we adopt the Generalised Impulses in the, identified policy variables as a result of sho, The results of the impulse response analyses are presented i, represent VAR models with two fiscal policy variables, one monetary p, investment and consumption with output entering all the models. In this paper an econometric panel study is conducted on a sample of rich countries covering the 1970–1995 period. In part, this may reflect the prediction in economic theory that a negative relationship should exist primarily for rich countries with large public sectors. Our main findings are: (i) there is a strong association between the development level and the fiscal structure: poor countries rely heavily on international trade taxes, while income taxes are only important in developed economies; (ii) fiscal policy is influenced by the scale of the economy, measured by its population; (iii) investment in transport and communication is consistently correlated with growth; (iv) the effects of taxation are difficult to isolate empirically. Like model 4 the impulse responses are quite weak, and they do deviate marginally if at all from equilibrium. The empirical results indicate that (i) the nonmilitary public capital stock is dramatically more important in determining productivity than is either the flow of nonmilitary or military spending, (ii) military capital bears little relation to productivity, and (iii) a ‘core’ infrastructure of streets, highways, airports, mass transit, sewers, water systems, etc. Indeed there is a vigo, when it comes the decomposition of taxes and how individual tax components impact. The results from Vector Error Correction Method (VECM) showed that government expenditure positively and significantly impacted real economic activities' growth, but converse was the effect of public revenues on RGDP. There is a positive and statistically significant impact of health and education expenditure, aggregate of government expenditure, and aggregate of other fiscal variables on real per capita GDP. 2004) real GDP grew at a rate of 3.0% per year. So it looks like South Africa's fiscal policy is to spend spend spend and if we run out of money lets borrow money to spend spend spend. Fiscal Expenditure in South Africa decreased to 140205 ZAR Million in September from 203164 ZAR Million in August of 2020. Large deficit spending necessitated by the downturn in growth and upturn in unemployment-induced social spending caused South Africa’s public debt level to escalate to The South African government spent 7,3% more in 2017/18 than it did in 2016/17. Blog by David Christianson - 28 Apr 2020. Therefore, fiscal policy should play a big role in ing affect Specifically, our focus is on the growth effects of productive government spending in dynamic general equilibrium models. economic growth (see Engen and Skinner, 1996; The size of the public debt and its effect on growth is also ex, competing theories. Several empirical studies have investigated the effect of fiscal policy on various macroeconomic variables such as inflation, debts, interest rates, unemployment and growth (GDP) for diverse economies, using variant methods.
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