The nexus between government revenue and macroeconomic objectives in a developing country: A case of South Africa

The state of the economy, public confidence, fiscal policy choices as well as administrative efficiency all play an important role in revenue outcomes. Over the last decade, the South African economy has endured prevailing challenges of a weak economic growth, growing public sector wage bill that has exacerbated spending, widening budget deficit, and excessively growing public debt levels among others. Amidst these challenges, the country's revenue collection has continued to perform below expectations, fuelling increased vulnerability. The significance of acquiring and generating more revenue has become evident, especially during the ongoing Coronavirus pandemic and worsening socio-economic indicators which are all but painting gloomy economic prospects. Having an understanding of the nexus between the revenue and macroeconomic objectives of the government is crucial for the formulation of sustainable fiscal policy as well as the realisation of long-term growth and development. The primary objective of this study is therefore to analyse the relationship between government revenue and macroeconomic objectives in the South Africa. The study followed a quantitative research approach using quarterly time series data from 1995Q1 to 2020Q2. The analysis entailed descriptive and econometric analysis. Specifically, an Autoregressive Distributed Lag (ARDL) model was employed to determine the long and short run effects of government revenue and macroeconomic objectives in South Africa. The choice of this estimation model was driven by the consistency in the results it produces while at the same time, allowing the use of data regardless of its stationarity (I(0), I(1) or a combination). In addition, the Toda Yamamoto Non-Granger causality test was employed to determine causality between the selected variables. Keywords: government revenue; non-tax government revenue; macroeconomic objectives; government spending; South Africa

IMPACT OF CURRENT ACCOUNT ON JORDANIAN PUBLIC BUDGET DEFICIT FOR THE PERIOD (1992-2016)

This study aims to measure the impact of current account (CA) on Jordanian public budget deficit (BD) for the period (1992-2016) . The econometrics model was built for purpose of measuring and analyzing the impact of current account on Jordanian public budget deficit. Before estimating the parameters of the econometrics model was used some tests to verify its validity, for example: Test Augment Dickey-Fuller (ADF) to verify that the unit root test problem for stationary of the time series, and use Johansen methodology to test the co-integration, and use the Granger causality Test, and the Vector Auto Regressive (VAR) was used to analyze the study data. The causality test showed that the causal relationship between the two variables is bi-directional, where the direction of the relationship of current account (CA) towards Jordanian public budget deficit (BD) and conversely. The study found that there exist a statistically significant impact for current account (CA) on Jordanian public budget deficit (BD) at the significance level (α = 0.05), and this result is considered compatible with the Jordanian economy. The study recommends that Jordan need to follow policy in order to improve the payments balance, such as increasing the Jordan's exports of goods or reducing the imports of luxury goods. KEYWORDS: Current account, Public budget deficit, Government spending, Trade balance, Sustainable fiscal policy.

Do fiscal regimes matter for fiscal sustainability in South Africa? A Markov-switching approach

This paper empirically examines South Africa’s fiscal sustainability through a Markov-switching model which utilizes quarterly datasets for the period from 1960 to 2019. The results show that public debt responds positively, demonstrating a sustainable fiscal policy. Furthermore, considering the regime-specific feedback coefficients of the fiscal policy rule and the durations of fiscal regimes, the study finds that South Africa’s fiscal policy satisfies the No-Ponzi game condition. Therefore, from a policy perspective, the South African government should take measures such as pension reforms, reducing operational expenses, reducing subsidies, and funding micro and small enterprises to gain the double dividend on the expenditure side along with revenue-enhancing measures on consumption taxes to achieve stable public finances and lower debt levels.

Economic Policy

This chapter identifies the differing policies and outcomes that Canadians and Americans have pursued with respect to economic growth, stabilization, and income distribution, and it analyzes several factors that can partially explain why divergent policy choices have emerged. The United States (U.S.) has recorded better productivity growth, while Canada has achieved a more sustainable fiscal policy, a less fragile financial sector, and more generous distributional policies. These contrasting outcomes are related to differences in size and geography, in political culture, and in political institutions. The analysis also considers how much it may be possible for each country’s policymakers to benefit from the other’s experiences. While identifying some lessons in this regard, the authors conclude that the sheer difference in the size of the two economies affects which economic policies can be expected to be effective. As a result, it is concluded that convergence in economic policymaking will remain somewhat limited.

ASSESSMENT OF FISCAL POLICY IN LATVIA

The aim of the research is: to evaluate the fiscal policy in Latvia in accordance with the theoretical and practical conclusions of scientific investigations in the world, to determine the main fiscal risks and to find fiscal policy gaps in national government budgeting as well as in the use of funds and to define recommendations for making a sustainable fiscal policy in the country. At present, economic development in the world and Europe, the geopolitical situation, the migration of the population as well as the domestic problems of the development of Latvia pose new challenges to the government’s fiscal policy; they create new fiscal risks and problems that require strong fiscal discipline and an efficient fiscal policy. The fact that Latvia did not have fiscal reserve resources for easier survival of the crisis is a severe and painful lesson about the errors in the fiscal policy. New circumstances that have occurred recently have to be taken into account by the policy makers. In order to build an effective fiscal policy, the following has to be found out: the most important factors of impact, whether they are of objective or subjective nature, and what fiscal risks may threaten the performance of individual fiscal indicators, and how big must be the fiscal security reserve.

Null-Zins-Politik und PPP: Ein Kaleidoskop zu Fallbeispielen von Markt- und Staatsversagen

Zusammenfassung: Seit 2008 bedroht, ausgehend vom Finanzsektor, eine Wirtschaftskrise wie 1929 unser System. Nach kurzen koordinierten fiskalpolitischen Interventionen liegt seit Jahren die Stabilisierungslast allein bei den Zentralbanken. In der Eurozone hält die Null-Zins-Politik nun schon fünf Jahre an. Diese Situation bewirkt wiederum einen Lobbydruck des Finanzsektors für gleichzeitig risikoarme und renditestarke Anlagen zur Stabilisierung des tradierten Geschäftsmodells. Hierfür hat der Investitionsbedarf im Infrastrukturbereich zentrale Bedeutung. Um diesem Mangel Rechnung zu tragen, erscheinen Public Private Partnerships (PPP) eine Win-win-Lösung zu sein. Bevor man dieser Idee folgt, sollten allerdings Langfristerfahrungen zu PPP ausgewertet werden. In diesem Beitrag werden durch eine Aktualisierung von Fallstudien zu PPP im Wasser- und Abwasserbereich Ergebnisse zu den langfristigen finanzwirtschaftlichen Folgen dargestellt. Die Hypothese dieses Beitrages: Empirische Erfahrungen stehen im Gegensatz zur Erwartung einer Win-win-Lösung durch PPP. Summary: Induced by the financial sector in 2008, an economic crisis similar to that of 1929 is threatening our system. After a short period of cooperative fiscal policy, the task of stabilization now rests fully with the EZB. Zero Interest Rate Policies have marked the Euro zone for around five years. This in turn forces the finance sector to lobby for investments with low risks and high profits in order to stabilize traditional business models. The investment gap in infrastructure is hereby of central importance. Public Private Partnerships (PPP) seem to be the win-win solution to fill this gap. Before pursuing this idea, however, it might be wise to evaluate long term experience with PPP. This paper focusses on the long term financial results of PPP in the water and waste water sector. The analysis was made by actualization of broader case studies in this area. The hypothesis in this contribution: Empirical experience does not confirm the expectations of PPP as a win-win solution. The results in brief: Banks and operating agencies are the winners. Municipalities implementing infrastructural measures, along with their customers and fee payers, suffered losses. PPP led to an increase in shadow budgets and therefore these projects are quite the opposite of a sustainable fiscal policy. As such, the paper argues for regulation of PPP projects not only in the investigated area but also for the upcoming Federal Infrastructure Agency and the European Fund for Strategic Investments.

Analyzing Fiscal Balance Evolution for Developed and Emerging Countries

The purpose of our paper is to analyze the main factors which influence fiscal balance’s evolution and thereby identify solutions for configuring a sustainable fiscal policy. We have selected as independent variables some of the main macroeconomic measures, respectively public debt, unemployment rate, economy openness degree, population, consumer goods’ price index, current account balance, direct foreign investments and economic growth rate. Our research method uses two econometric models applied on a sample of 22 countries, respectively 14 developed and 8 emergent. The first model is a multiple regression and studies the connection between the fiscal balance and selected independent variables, whereas the second one uses first order differences and introduces economic freedom as a dummy variable to catch the dynamic influences of selected measures upon fiscal result. The time interval considered was 1999-2013. The results generated using the two models revealed that public debt, current account balance and economic growth significantly influence the fiscal balance. As a consequence, the governments need to plan and implement a fiscal policy which resonates with economy priorities and the phase of the economic cycle, as well as ensure a proper management of the public debt, stimulate sustainable economic growth and employment.