What fiscal policy measures are associated with higher economic growth in South Africa? With specific reference to spending and taxation
Date
2022
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Abstract
This paper investigated fiscal policy measures that impact economic growth by testing variables such as expenditure, personal income tax (PIT), corporate income tax (CIT), government debt and household consumption expenditure from 1994 to 2019. The study employed the Vector Autoregressive Model (VAR) for short-run and the Vector Error Regression Model (VEMC) for long-run models for model 1 and model 2 since there was more than two cointegration in the models. The study employed the Ordinary Least Squares (OLS) for model 3 since there was no cointegration. The findings indicated that the variables have varying effects on private investment and economic growth in the short run. At the same time, an increase in debt will likely increase expenditure in the long run. A decreased household consumption expenditure would likely increase economic growth in the long run. There is a significant negative relationship between corporate tax and economic growth and a significant positive relationship between government debt and economic growth. The study further provides recommendations.
Description
A dissertation submitted in fulfilment of the requirements for the degree of Master of Commerce to the Faculty of Commerce, Law and Management, University of the Witwatersrand, Johannesburg, 2022
Keywords
Fiscal policy, Taxation, Government expenditure