Fiscal Sustainability and the Fiscal Reaction Function for South Africa

28 Pages Posted: 5 Apr 2011

See all articles by Philippe Burger

Philippe Burger

University of the Free State

Ian Stuart

affiliation not provided to SSRN

Charl Jooste

World Bank

Alfredo Cuevas

International Monetary Fund (IMF)

Date Written: March 2011

Abstract

How does the South African government react to changes in its debt position? In investigating the question, this paper estimates fiscal reaction functions using various methods (OLS, VAR, TAR, GMM, State-Space modelling and VECM). The paper finds that since 1946 the South African government has ran a sustainable fiscal policy, by reducing the primary deficit or increasing the surplus in response to rising debt. Looking ahead, the paper considers the use of fiscal reaction functions to forecast the debt/GDP ratio and gauging the likelihood of achieving policy goals with the aid of probabilistic simulations and fan charts.

Keywords: Economic growth, Economic models, Fiscal policy, Fiscal sustainability, Public debt, South Africa

Suggested Citation

Burger, Philippe and Stuart, Ian and Jooste, Charl and Cuevas, Alfredo, Fiscal Sustainability and the Fiscal Reaction Function for South Africa (March 2011). IMF Working Paper No. 11/69, Available at SSRN: https://ssrn.com/abstract=1802982

Philippe Burger

University of the Free State ( email )

205 Nelson Mandela Drive
Park West
Bloemfontein, Free State 9300
South Africa

Ian Stuart

affiliation not provided to SSRN ( email )

Charl Jooste

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Alfredo Cuevas

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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