Fiscal policy and commodity price shocks in South Africa

Tumisang Loate and Vincent Dadam

No wp-2025-22, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: This paper investigates the effect of commodity price shocks in a commodity-exporting small open economy, and the role of fiscal policy in transmitting these shocks to the rest of the economy. Using South African data, we first estimate an empirical model using a Bayesian vector autoregression model. We then develop a New Keynesian small open economy with labour market hysteresis and commodity price shocks. We find that a commodity price shock typically has an expansionary effect as real GDP and employment increase, which translates into higher tax revenue.

Keywords: Fiscal policy; Commodity trading; Price shocks (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-dge, nep-inv and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:unu:wpaper:wp-2025-22

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