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Fiscal cyclicality in South African public expenditures: Do asymmetries explain inconsistencies?

Kambale Kavese () and Andrew Phiri ()
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Kambale Kavese: Eastern Cape Socio Economic Consultation Council

No 1909, Working Papers from Department of Economics, Nelson Mandela University

Abstract: The most recent sub-prime crisis, the Euro-debt crisis and the global recessionary period have resurrected a debate on the nature of fiscal cyclicality in the South African economy. Our study questions whether the cyclicality of public policy has evolved asymmetrically and holds differently over the recessionary and expansionary phases of the South African business cycle for a quarterly period of 2001:01 – 2018:04. To ensure that the business cycle is inherent to our estimation process we rely on the nonlinear autoregressive distributive lag (N-ARDL) model as empirical framework. Our empirical results point to nonlinear cyclicality in fiscal expenditures where government behaves procyclical in the upswing of the business cycle whilst behaving countercyclical during economic downswings. These findings are robust to alternative specifications, inclusion of control variables and estimations across different subsamples. Policy implications are also offered.

Keywords: Fiscal cyclicality; Business cycles; Nonlinear autoregressive distributive lag (NARDL) model; South Africa; Emerging Market economies, Sub-Saharan Africa (SSA). (search for similar items in EconPapers)
JEL-codes: C32 C51 C52 E32 E62 H61 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr and nep-mac
Date: 2019-09, Revised 2019-09
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http://repec.mandela.ac.za/RePEc/mnd/wpaper/paper.1909.pdf First version, 2019 (application/pdf)

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