Effect of Fiscal and Monetary Policies on Economic Activities in South Africa: The Role of Policy Uncertainty

Goodness Aye ()
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Goodness Aye: Department of Economics, University of Pretoria, Pretoria, 0002, South Africa

No 202082, Working Papers from University of Pretoria, Department of Economics

Abstract: The study examines the effect of fiscal and monetary policies on economic activities in South Africa while attempting to identify the role of uncertainty. The study utilized quarterly time series data using the variables of income tax, consumption tax, capital tax, and government expenditure to measure fiscal policy uncertainty while interest and inflation rate variables were used to measure monetary policy uncertainty. Also, real gross domestic product, real consumption, real investment, and employment were used to measure economic activities. The partial least squares structural equation model (PLS-SEM) was used for analysis and result presented for measurement and structural models. Results revealed the existence of policy uncertainty in the South African economy which tends to reduce the level of economic activity as uncertainty increases. This result informs of the need for policy makers to minimally reduce uncertainties for both fiscal and monetary policies for the economy to improve.

Keywords: Policy uncertainty; fiscal policy; monetary policy; economic activity; PLS-SEM (search for similar items in EconPapers)
JEL-codes: C32 E32 E52 H32 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2020-09
New Economics Papers: this item is included in nep-mac
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