Financial Markets Shocks and Monetary Policy in South Africa: A Bayesian Var Approach

Hlongwane, Tshembhani M.; Sheefeni, Johannes Peyavali Sheefeni

doi:10.47743/jopafl-2022-26-14

Cited by 1 publication

(2 citation statements)

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“…Clearly the South African economy is characterised by macroeconomic instability in general, particularly fiscal instability. It is for this reason that Hlongwane, (2023), point out that fiscal policy instruments are beneficial provided they used to counter slowdown in the economy and ensure fiscal stability. Fiscal policy intention is to stimulate economic and social development by pursuing policy stance that ensures balance between taxation, expenditure and borrowing that is consistent with sustainable development (Ojong et al 2016).…”

Section: Introductionmentioning

confidence: 99%

“…Therefore, higher taxes support higher levels of public expenditure some of which may foster economic growth. In this regard, Hlongwane (2023) added that availability of resources that can be spent by the government is determined by the size and structure of the tax base. Al-Afeef et al (2022) and Maganya (2020) further argue that a wide tax base combined with high economic growth have a potential to reduce the long-term dependency of developing and emerging countries on aid and ensure achievement of macroeconomic stability.…”

Section: Introductionmentioning

confidence: 99%

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Economic Growth Effects of Fiscal Policy in South Africa: Empirical Evidence from Personal Income Tax

Tala

2024

IJEFI

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This study determined economic growth effects of fiscal policy in South Africa. Particular attention was paid to effects of personal income tax on economic growth for the period 1993Q3 -2022Q4. The influence of personal income tax on economic growth was analysed using non-linear autoregressive distributed lag (NARDL) bounds test for cointegration. Estimated results indicated rise in personal income tax is growth-friendly in the short-run. While, in the long –run growth is affected by both positive and negative shocks in personal income tax. Positive personal income tax changes are detrimental to economic growth in the long run. Increasing personal income tax will compromise the country’s economic growth strategy. Furthermore, positive changes in personal income tax affect economic growth more than negative shocks as confirmed by dynamic multiplier graph. Dynamic multiplier graph further reveal existence of asymmetry. Additionally, Wald test value of -6.2775 validated asymmetric effect of personal income tax on economic growth. It is therefore, recommended that policy makers should focus on considering other sources of tax revenue. The current structure of the tax system is skewed towards personal income tax. Policy makers should keep the current ratio of personal income tax and widen tax base to realise inclusive economic growth.

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Section: Introductionmentioning

confidence: 99%