National Saving and Fiscal Policy in South Africa: an Empirical Analysis Sector in South Africa

Concerns have been raised in regards to how to redress a decreasing trend in national saving in South Africa. A number of authors have suggested that redressing government saving, through fiscal discipline characterised by a low government budget deficit ratio, should be a key in redressing the national saving trend in South Africa. In order to assess this hypothesis, this paper studies the dynamics of gross national saving, government saving and private saving in response to fiscal shocks, by using the impulse response functions (IRF) obtained from the structural vector autoregressive (SVAR). The paper constructs a structural model, contrary to the reduced-form models used in a number of studies, to assess the response of savings to fiscal shocks. The aim of this paper is twofold: while determining the extent to which fiscal policy influences savings in South Africa, the paper also offers to test whether the Ricardian Equivalence proposition holds in South Africa. The paper concludes that the full Ricardian Equivalence does not hold in the short term and in the long term the response of national saving to fiscal policy shocks is neutral.

Working Paper 084
1 June 2008
Related Journal

2008, African Finance Journal, 10(2), 51-67
20 September 2012
Publication Type: Working Paper
JEL Code: C5, E2, H3

Related South Africa’s Cities and Growth Spatial Challenges and Policy Interventions Content

Request for Proposals: The role of cities as drivers of growth and employment
Background Urbanization in South Africa is expected to reach 80% by...
Call for Work
South Africa’s future will be decided in our cities
Discussion Document 14 South Africa’s cities face multiple, overlap...
Dieter von Fintel, Justin Visagie, Ivan Turok, Takwanisa Machemedze, Claus Rabe, Sebastian Galiani, Edward Glaeser
Discussion Document
Monitoring South Africa’s metropolitan economies: A survey of the data landscape
Discussion Document 13 Disparities in data across different metropo...
Dieter von Fintel
Discussion Document
Cities, productivity and Jobs in SA: Problems and potential
Discussion Document 12 Cities contribute to national prosperity bec...
Ivan Turok, Justin Visagie
Discussion Document
Place-based economic policies: international lessons for South Africa
Discussion Document 11 Place-based policies are designed to support...
Harris Selod, Claus Rabe
Discussion Document
What luminosity data can and cannot reveal about South Africa’s urban economies
Discussion Document 10 As novel types of data are becoming availabl...
Takwanisa Machemedze
Discussion Document
Crime: A policy-oriented survey
Discussion Document 9 South Africa has a reputation for having high...
Sebastian Galiani
Discussion Document
Virtual CDE Workshop on SA Cities and Growth
Urban economics has provided powerful insights into how the charact...