Is South Africa falling into a fiscal-dominant regime
Luchelle Soobyah, Mulalo Mamburu, Nicola Viegi
Last Modified Date:
2023-12-11, 01:00 PM
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The sustainability of fiscal policy has been at the forefront of policy analysis since the global financial crisis and subsequent debt crises. With the elevated government debt levels observed globally, the emergence of fiscal dominance has caused some concern. In this paper we assess whether there was or is evidence of fiscal dominance in South Africa by determining periods in which fiscal and monetary policy was passive or active. By estimating a Markov switching model on the reaction functions of a fiscal and monetary policy rule, we find that there has been some evidence of fiscal dominance in South Africa since 2016.