The relationship between budget deficit and interest rates in South Africa: some econometric results

Akinboade, Oludele Akinloye

doi:10.1080/0376835042000219550

Cited by 13 publications

(9 citation statements)

References 26 publications

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“…The author finds that budget deficits do not influence interest rates in South Africa. Uwilingiye and Gupta (2007) verify the claim made by Akinboade (2004) using Granger causality and cointegration analysis. The authors focused on the relationship between the short-term interest rate and budget deficits and found that the causal relationship between the shortterm interest rate and budget deficit depends on the periodicity of the data.…”

Section: Literature Reviewmentioning

confidence: 95%

Budget deficit and long-term interest rates in South Africa

Bonga‐Bonga¹

2012

Afr. J. Bus. Manage.

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This paper investigated the extent of the effects of the systematic and surprise changes in budget deficits on the long-term interest rate in South Africa. Use was made of the identified cointegrating vector autoregressive (VAR) techniques whereby cointegrating vectors were identified based on theFisher effect theory and the expectation hypothesis of the term structure to assess the effect of systematic changes in budget deficit on the long-term interest rate. Moreover, the generalised impulse response functions obtained from the cointegrating VAR were used to assess the effect of the surprise change in budget deficit on the long-term interest rate. The results of the paper showed a positive relationship between the budget deficits and long-term interest rate under different assumptions of price expectations by economic agents.

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Section: Literature Reviewmentioning

confidence: 95%

Budget deficit and long-term interest rates in South Africa

Bonga‐Bonga¹

2012

Afr. J. Bus. Manage.

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“…Several studies regarding budget deficits have been conducted by previous researchers. Arora and Dua (1993), Saleh (1996), Akinboade (2004), Bayar, and Smeets (2009) as well as Agnello, and Sousa ( 2009)examined budget deficits in the developed countries. These researchers used different data sets and applied different econometric methods, and therefore discovered assorted results.…”

Section: An Overview Of Literaturementioning

confidence: 99%

The Economic Determinants of Budget Deficits in South Africa

Murwirapachena

Maredza

Choga

2013

MJSS

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Since 1980, South Africa recorded massive budget deficits except in 2007 and 2008 when the budget surpluses as a percentage of GDP respectively stood at 0.3 per cent and 0.7 per cent. This stirred a great debate on whether budget deficits in South Africa are a result of poor governance or are due to the magnitude of the economic problems that the government seeks to alleviate. Therefore, this study examines the economic determinants of budget deficits in South Africa for the period 1980 -2010. Specifically, the study seeks to ascertain if budget deficits in South Africa are a result of the fight against economic problems. The Vector Error Correction Model (VECM) was used to determine the impact of selected macroeconomic variables on budget deficits in South Africa. The results revealed that all the determinants have a positive impact on budget deficits except for foreign debt. However, foreign reserves explain the largest component variation of budget deficit followed by foreign debt, unemployment, economic growth and government investment, in that order.

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“…Table 2 shows that fiscal deficits do not influence the prime rate, which confirms the interest neutrality of budget deficits (Akinboade 2004;Barro 1989;Choi & Holmes 2014;Darrat 1989). Table 3 shows that budget deficits do not granger cause the prime rate.…”

Section: Vector Autoregressive Regression and Autoregressive Distribu...mentioning

confidence: 57%

“…A study of sub-Saharan African economies also found the Ricardian claim that interest rates are non-responsive or neutral to changes in fiscal deficits to hold (Kelikume 2016). Akinboade (2004) also found fiscal deficits to have no effect on interest rates in South Africa, while Bonga-Bonga (2012) found budget deficits to have a positive effect on long-term interest rates. Akinboade (2004) tested the relationship on all kinds of nominal interest rates and the relationship was robust.…”

Section: The Neoclassical Link Between Fiscal Deficit and Unemploymentmentioning

confidence: 99%

“…Akinboade (2004) also found fiscal deficits to have no effect on interest rates in South Africa, while Bonga-Bonga (2012) found budget deficits to have a positive effect on long-term interest rates. Akinboade (2004) tested the relationship on all kinds of nominal interest rates and the relationship was robust.…”

Section: The Neoclassical Link Between Fiscal Deficit and Unemploymentmentioning

confidence: 99%

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Relationship between fiscal deficits and unemployment in South Africa

Marire

2022

J. econ. financ. sci.

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Practical/managerial implications: Fiscal authorities have to use fiscal deficits creatively in managing unemployment to create a balanced economy. The fiscal balance, up to a threshold, between 0.8% (surplus) and 1.9% (deficit) of gross domestic product (GDP) in the short term and between 1.7% (deficit) and 1.9% (deficit) in the long term reduces unemployment as per the estimates of the study. Contribution/value-add:The finding that fiscal deficits increase unemployment does not justify a weak fiscal policy stance. The finding that fiscal deficits reduce unemployment up to a point before they begin to increase it in the long-term complements existing literature, which shows that South Africa's government expenditure to GDP ratio has exceeded its optimal level.

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The relationship between budget deficit and interest rates in South Africa: some econometric results

Cited by 13 publications

References 26 publications

Budget deficit and long-term interest rates in South Africa

Budget deficit and long-term interest rates in South Africa

The Economic Determinants of Budget Deficits in South Africa

Relationship between fiscal deficits and unemployment in South Africa

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