The Nexus between Government Revenue and Macroeconomic Indicators in South Africa

Thomas Habanabakize (), Lerato Mothib () and Precious Mncayi ()
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Thomas Habanabakize: North-West University, South Africa
Lerato Mothib: North-West University, South Africa
Precious Mncayi: North-West University, South Africa

Eurasian Journal of Business and Management, 2021, vol. 9, issue 4, 258-267

Abstract: Government revenue plays a paramount role in any country’s development and citizen welfare. This is done through government provision of crucial services related to development which include but not limited to finances or subsidies to business entities and citizens through the national wealth distribution. The importance of government revenue is directly correlated with other equally important outcomes. Hence, there exist an interdependence or interaction between macroeconomic variables and government revenue. Therefore, understanding the relationship between government revenue and macroeconomic variables can assist in improving a country’s economy and the development of its people. The core objective of this study was to analyze the effect of some macroeconomic variables on the South African government revenue from 1994 to 2021. Both short-run and long run relationships amongst variables were analyzed using the autoregressive distributed lag (ARDL) model. The long-run and short-run findings indicated that the level of government revenue depends on performance of the analyzed macroeconomic variables namely; balance of payments, economic growth, employment and real effective exchange rate. Employment and economic growth were found to be the major determinants of government revenue. Consequently, the study suggests that the introduction and implementation of policies and strategies that enhance employment opportunities and promote economic growth would be a fundamental way to increase government revenue and improve economic and social well-being.

Keywords: Autoregressive Distributed Lag; Government Revenue; Revenue; Macroeconomic Indicators; South Africa (search for similar items in EconPapers)
Date: 2021
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