Fiscal sustainability and the fiscal reaction function for South Africa

By Charl Jooste, Alfredo Cuevas, Ian C. Stuart, Philippe Burger

March 1, 2011

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Charl Jooste, Alfredo Cuevas, Ian C. Stuart, and Philippe Burger. Fiscal sustainability and the fiscal reaction function for South Africa, (USA: International Monetary Fund, 2011) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Fiscal policy, Fiscal stance, Output gap, Public debt, Real interest rates

Keywords: GDP ratio, WP

Publication Details

Pages:

27
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2011/069
Stock No:

WPIEA2011069
ISBN:

9781455227105
ISSN:

1018-5941

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