Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/229316
Authors: 
Kemp, Johannes Hermanus
Hollander, Hylton
Year of Publication: 
2020
Series/Report no.: 
WIDER Working Paper No. 2020/92
Abstract: 
Much of the research on fiscal multipliers has used reduced form modelling approaches. While these models have been extended to include richer controls and identification approaches, it remains unclear whether shocks identified capture the true structural shocks. An alternative way to identify these shocks is through dynamic stochastic general equilibrium models. This paper estimates an open-economy dynamic stochastic general equilibrium model for South Africa, but with a more detailed fiscal block, to measure the impact of fiscal policy shocks on macroeconomic outcomes. Simulations indicate that government spending and investment multipliers are generally positive, albeit smaller than 1. Second, it is found that taxes are highly distortionary, with large negative multipliers for private consumption and investment. In contrast, the impact of tax shocks on output is ambiguous. Finally, simulations suggest that government consumption spending and labour and consumption taxes are the most effective instruments for stabilizing debt after a fiscal shock.
Subjects: 
dynamic stochastic general equilibrium model
fiscal policy
fiscal multiplier
Bayesian inference
JEL: 
C32
E32
E62
H62
H63
Persistent Identifier of the first edition: 
ISBN: 
978-92-9256-849-8
Document Type: 
Working Paper

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