- Title
- Fiscal consolidation and economic growth: a comparison of South Africa and selected three OECD countries
- Creator
- Mphaphuli, Zeb Junior Rabelani
- Subject
- Fiscal consolidation
- Subject
- Economic growth -- South Africa
- Subject
- OECD countries
- Date Issued
- 2023-04
- Date
- 2023-04
- Type
- Master's theses
- Type
- text
- Identifier
- http://hdl.handle.net/10948/62142
- Identifier
- vital:72001
- Description
- The study examined the relationship between fiscal consolidation and economic growth in South Africa (SA) in comparison with the Organisation for Economic Cooperation and Development (OECD) countries. The study emphasizes the use of fiscal consolidation as a tool to stimulate economic growth and reduce the budget deficit, focusing on the reforms of public revenues and expenditures. Moreover, the study employed the panel Autoregressive Distributed Lag (PARDL) model to explore the relationship between fiscal consolidation and economic growth in SA and three OECD countries from the period 1990 - 2018. The cointegration analysis confirmed the existence of cointegration between the variables which suggested that there is a long-run relationship among the variables. As a result, both long and short run dynamic models were evaluated. The result of the study shows that fiscal consolidation positively affects economic growth in South Africa in the long run, whilst in OECD countries fiscal consolidation negatively affects economic growth, both in the short and long run. Low government debt in South Africa due to lower deficit translated to a higher economic growth whilst higher debt level in OECD countries due to higher government spending translated to higher economic growth, one of the main differences in the relationship between fiscal consolidation and economic growth in South Africa and OECD countries is their spending pattern. Majority of South Africa’s budget is spent on inefficient state-owned enterprises, which have accounted for the bulk of government contingent liabilities, resulting in high borrowing costs, which consequently lead to high borrowing cost, thus the rising central government debt as a percentage of GDP. Unlike in SA, OECD countries spend towards capital expenditure specifically in priority areas such as infrastructure, Technology, and transport hence their high debt levels result in higher economic growth. In attempt to stimulate South Africa's economic growth, it is recommended that South Africa implement effective fiscal consolidations based on expenditure adjustments rather than revenue adjustments, as expenditure adjustments are more likely to reduce deficits and debt-to-GDP ratios and are more effective. In addition, the South African fiscal stimulus package can be used to invest more in infrastructure to increase private capital accumulation and stimulate economic growth. However, South Africa must exercise caution when reducing expenditures to avoid a reduction in development spending, which could lead to a decline in unemployment.
- Description
- Thesis (Ma) -- Faculty of Faculty of Business and Economic Sciences, 2023
- Format
- computer
- Format
- online resource
- Format
- application/pdf
- Format
- 1 online resource (xi, 124pages)
- Format
- Publisher
- Nelson Mandela University
- Publisher
- Faculty of Faculty of Business and Economic Sciences
- Language
- English
- Rights
- Nelson Mandela University
- Rights
- All Rights Reserved
- Rights
- Open Access
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NMU School for Economics, Development and Tourism
| Thumbnail | File | Description | Size | Format | |||
|---|---|---|---|---|---|---|---|
| View Details Download | SOURCE1 | MPHAPHULI, Z.J.R.pdf | 2 MB | Adobe Acrobat PDF | View Details Download |