Impact of fiscal policy in an intertemporal CGE model for South Africa

Fiscal multipliers in South Africa: The importance of financial sector dynamics

“…These authors argue that the small multiplier reflects high imports leakage, which is common for open economies. Mabugu et al (2013), employing an inter-temporal CGE model, find that government expenditure can have a positive impact if it is on investment, and this translates into higher productivity. Other types of expenditure tend to have very small multipliers.…”

Can public debt stimulate public investment and economic growth in South Africa?

“…Public debt makes it possible for government to invest in those areas that are critical for the economy whereby tax revenue is not enough to finance such projects. It should be noted that financing government expenditure through public debt can be detrimental to the economy (Ramos, Veronique, Helene, & Margaret, 2013;Tsoulfidis, 2007). In the instances where government expenditure is unproductive, that is expenditure to pay for government employees and expenditure on army maintenance, it follows that public debt undermines the capacity of the economy to gain momentum.…”

Analysing job creation effects of scaling up infrastructure spending in South Africa

“…In this respect we draw from the extensive infrastructure productivity econometrics literature discussed to postulate positive productive externalities associated with new infrastructure for South Africa. Unlike Mabugu et al (2013a), labour market peculiarities of the South African economy have been included in our modelling and dynamics are modelled as recursive rather than intertemporal. This article is intended to contribute to the discussion by providing evidence from South Africa using the economy-wide dynamic CGE model calibrated to contemporary conditions in the country.…”

“…World Bank (2005) reports a similar finding for Ethiopia based on a model that focused on aid-financed investments in human capital. Mabugu et al(2013a) use an intertemporal CGE model to investigate the consequences of an expansive fiscal policy designed to accelerate economic growth in South Africa. The model is oriented towards constraints the government faces in financing its expenditures and explains why it takes into account the different sources of income of the South African government, its expenditures and its deficit as well as intertemporal dynamics.…”