Debt sustainability and financial crises in South Africa

Ruthira Naraidoo and Leroi Raputsoane

No 201352, Working Papers from University of Pretoria, Department of Economics

Abstract: This study assesses debt sustainability in South Africa allowing for possible nonlinearities in the form of threshold behaviour by fiscal authorities. A long historical data series on the debtto- GDP ratio and models with fixed and time-varying thresholds allowing the level of debt to vary relative to its recent history and the occurrence of financial crises are used in the analysis. First, the results reveal that fiscal consolidation occurs at a much lower debt-to-GDP ratio of 46 percent in the period 1946 to 2010 compared to 65 percent in the period 1865 to 1945. Secondly, the results provide evidence of a statistically insignificant fiscal consolidation below these threshold levels. Thirdly, the results reveal that fiscal consolidation occur at a higher debt-to-GDP ratio during financial crises periods.

Keywords: Sovereign debt; thresholds; financial crisis (search for similar items in EconPapers)
JEL-codes: C22 C51 E62 H63 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2013-09
New Economics Papers: this item is included in nep-afr and nep-his
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Debt Sustainability and Financial Crises in South Africa (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201352

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