Economic Growth, Redistribution Policy and Fiscal Policy in South Africa: An SVAR Analysis

Abstract

The aim of this article is to uncover which method of fi nancing an increase in social
services expenditure would guarantee economic growth while assuring that government operates within a balanced budget constraint. The article will also assess whether fi scal policy (which aims at fiscal discipline) could improve the rate of economic growth when a particular tax is used to fi nance social services expenditure. The SVAR models applied in this study used two types of restrictions: the contemporaneous and the long-run
(Blanchard and Quah) restriction. In the Blanchard and Quah restriction, structural shocks are identifi ed under two different categories: the Keynesian and neoclassical types.

Africa Insight Vol. 38 (1) 2008: pp. 67-80