n African Journal of Business and Economic Research - Assessing the impact of fiscal policy on economic growth in South Africa

Volume 14 Number 1
  • ISSN : 1750-4554
  • E-ISSN: 1750-4562



The study analysed the impact of fiscal policy on economic growth in South Africa, using the annual time series data from 1960-2017. The study employed Johansen VECM approach to examine the short-run and long-run relationship between fiscal policy variables and economic growth. The economic variables for empirical investigation include government expenditure, revenues, public debt, gross fixed capital formation, and economic growth. The empirical findings show that government revenues and gross fixed capital formation have a significant positive long-run impact on economic growth in South Africa. While government expenditure and public debt share a negative long-run relationship with economic growth, the government expenditure has been growing at a higher pace than revenues. The study proposes that policymakers ought to formulate prudent fiscal policies that encourage gross fixed capital formation which would have a direct impact on tax revenues, reduce public deficit and debt, and ultimately improve economic growth.

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