Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/269939 
Year of Publication: 
2020
Citation: 
[Journal:] Cogent Economics & Finance [ISSN:] 2332-2039 [Volume:] 8 [Issue:] 1 [Article No.:] 1790948 [Year:] 2020 [Pages:] 1-19
Publisher: 
Taylor & Francis, Abingdon
Abstract: 
While there is a general agreement on the effectiveness of fiscal stimulus, there is no consensus on which stimulus is better. To address this concern, this paper uses a Dynamic Stochastic General Equilibrium (DSGE) model to propose a fiscal stimulus that Botswana can adopt given the slowing mining productivity. The results suggest that short-run macroeconomic stabilisation can be achieved through a cut in labour taxes. This fiscal stimulus generates larger growth multipliers and contributes relatively more employment compared to a cut in consumption tax and increases in government spending. The findings also revealed that a cut in labour taxes improves trade balance, resulting in a greater accumulation of international reserves and has no Dutch disease effects. These results suggest the need for a labour tax policy reform. These results also offer some policy options for other developing countries, which may face similar fiscal risks in future.
Subjects: 
Botswana
DSGE
fiscal policy
fiscal stimulus
JEL: 
C61
E62
H30
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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