Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/304264 
Year of Publication: 
2023
Citation: 
[Journal:] Cogent Economics & Finance [ISSN:] 2332-2039 [Volume:] 11 [Issue:] 2 [Article No.:] 2280326 [Year:] 2023 [Pages:] 1-19
Publisher: 
Taylor & Francis, Abingdon
Abstract: 
This paper investigates the impact of fiscal consolidation in different states on domestic government debt in South Africa. The government budget constraint theoretical framework and Markov-switching dynamic regression (MSDR) from 1979 to 2022. The contribution of this paper is to examine fiscal consolidation on domestic government debt in different states using measures of fiscal consolidation that account for time-varying elasticity in the cyclical adjusted primary balance (CAPB). The U-shape is found which indicates that fiscal consolidation is effective in reducing domestic government debt at a low level. However, as domestic government debt reaches a high-level fiscal consolidation becomes detrimental and further increase domestic government. Given the result, it recommended that South Africa use less fiscal consolidation in the effort to reduce domestic government debt. Fiscal authorities need to use government expenditure in the productive sector of the economy that will bring about an increase in revenue rather than an increase in the tax rate as advocated in the fiscal consolidation policy. Moreover, develop a tax system that generates optimal tax revenue with adjustment of the tax rates.
Subjects: 
cyclical adjusted primary balance (CAPB)
domestic government debt
fiscal consolidation
Markov-switching dynamic regression (MSDR)
JEL: 
C82
E02
E60
E62
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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