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Analysing the Effects of Fiscal Policy Shocks in the South African Economy

Author(s): 
Charl Jooste, Guangling (Dave) Liu and Ruthira Naraidoo
Publication date: 
May 2013
This paper is the first one to analyse the effect of aggregate government spending and taxes on output for South Africa using three types of a calibrated DSGE model and more data driven models such as a structural vector error correction model (SVECM) and a time-varying parameter VAR (TVP-VAR) to capture possible asymmetries and time variation of fiscal impulses. The impulse responses indicate first, that increases in government expenditure have a positive impact, albeit (at times) less than unity, on GDP in the short run; second, over the long run, the impact of government expenditure on GDP is insignificant; and third, increases in taxes decreases GDP over the short run, while having negligible effects over longer horizons.
Publication PDF: 
Series title: 
Working paper 351
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