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Analysing the Effects of Fiscal Policy Shocks in the South African Economy

Charl Jooste (), Guangling Liu () and Ruthira Naraidoo ()

No 201206, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper is the first one to analyse the effect of aggregate government spending and taxes on output for South Africa using three types of a calibrated DSGE model and more data driven models such as a structural vector error correction (SVEC) model and a time-varying parameter VAR (TVP-VAR) to capture possible asymmetries and time variation of fiscal impulses. The impulse responses indicate first, that increases in government expenditure have a positive impact, albeit (at times) less than unity, on GDP in the short run; second, over the long run, the impact of government expenditure on GDP is insignificant; and third, increases in taxes decreases GDP over the short run, while having negligible effects over longer horizons.

Keywords: rule-of-thumb consumers; fiscal multiplier; government spending; TVP-VAR; SVECM (search for similar items in EconPapers)
JEL-codes: C54 D58 E32 E62 H31 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2012-02
New Economics Papers: this item is included in nep-afr and nep-dge
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Journal Article: Analysing the effects of fiscal policy shocks in the South African economy (2013) Downloads
Working Paper: Analysing the Effects of Fiscal Policy Shocks in the South African Economy (2013) Downloads
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