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Determinants of public debt in South Africa: A Regime-Switching Approach

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  • Hlongwane, Nyiko Worship
  • Daw, Olebogeng David
Abstract
The study investigates the determinants of public debt in South Africa. There is a problem of increasing public debt in South Africa accompanied with poor economic growth, high unemployment, high inequality, and proportionately high government spending. The study utilises time series data spanning for the period from 1990 to 2020 collected form secondary online data sources, that is, the South African Reserve Bank, Quantec Easy Data, Statistics South Africa, and the World Bank. The study employed a Simple Switching Regression Model and Granger Causality test to investigate the determinants of public debt in South Africa. Empirical results revealed that government deposits, business confidence, consumer prices inflation, government revenue and unemployment are significant determinants of public debt in both Regime 1 and 2. Government expenditure was found to be an insignificant determinant of public debt in Regime 2 while Gini-coefficient is an insignificant determinant of public debt only in Regime 1. Granger causality revealed that public debt has a causality effect on public debt. The study provided recommendations such as reducing heavy dependency on public debt to finance fiscal stimulus in South Africa.

Suggested Citation

  • Hlongwane, Nyiko Worship & Daw, Olebogeng David, 2022. "Determinants of public debt in South Africa: A Regime-Switching Approach," MPRA Paper 113203, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:113203
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    References listed on IDEAS

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    Cited by:

    1. Ngasamiaku, Wilhelm M. & Ngong'ho, Sende, 2022. "Macroeconomic Determinants of Public Debt in Tanzania: Empirical Evidence and lessons for Post COVID-19 Recovery," African Journal of Economic Review, African Journal of Economic Review, vol. 10(5), December.
    2. Anselm Komla Abotsi, 2024. "Fiscal policy sustainability and public debt in Africa," SN Business & Economics, Springer, vol. 4(1), pages 1-18, January.
    3. Javier Cifuentes-Faura & Mihaela Simionescu, 2024. "Analyzing the Importance of the Determinants of Public Debt and Its Policy Implications: A Survey of Literature," Public Finance Review, , vol. 52(3), pages 345-375, May.

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    More about this item

    Keywords

    Public debt; Unemployment; Inflation; Economic Growth; South Africa.;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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