Research on tax elasticities in South Africa mainly employs linear models and shows that taxes evolve symmetrically irrespective of the economic cycle. This study extends this research to show that taxes behave asymmetrically and nonlinearly during expansions and contractions. Estimated linear...

In addition to the conventional linear cointegration test, this paper tests the asymmetry relationship between revenue and expenditure i.e. making a distinction between the adjustment of positive (budget surplus) and negative (budget deficit) deviations from equilibrium using quarterly data on...

Consumption and output responses to fiscal shocks are studied in a model with fiscal foresight. Fiscal foresight reduces both output multipliers and consumption. However, key features such as sticky wages, credit constrained households and elastic labour supply, are able to generate both...

This study assesses debt sustainability in South Africa allowing for possible nonlinearities in the form of threshold behaviour by fiscal authorities. A long historical data series on the debtto- GDP ratio and models with fixed and time-varying thresholds allowing the level of debt to vary...

This paper exploits the Lucas’ (1973) signal extraction model to study the effect of uncertainty in the output-inflation trade-off on inflation, using a monetary model with asymmetric central bank preferences over inflation and output. We show that the implication of the uncertainty is...

This paper assesses the impact of uncertainty about the true state of the economy on monetary policy in South Africa since the adoption of inflation targeting. The paper also analyses the impact of uncertainty about the conditions in financial markets on the interest rate setting behavior that...

This paper is the first one to analyse the effect of aggregate government spending and taxes on output for South Africa using three types of a calibrated DSGE model and more data driven models such as a structural vector error correction (SVEC) model and a time-varying parameter VAR (TVP-VAR) to...

We test the concept of the Opportunistic Approach to monetary policy in South Africa post 2000 inflation targeting regime. Our findings support the two features of the opportunistic approach. First, we find that the models that include an intermediate target that reflects the recent history of...

Based on a representation of policymaker’s preferences that capture inflation zone targeting behaviors, we estimate a flexible model of the monetary policy reaction function of the South African Reserve Bank (SARB). To address the current debate on the importance of financial asset prices in...

This paper estimates the optimal monetary authorities’ response to deviations of inflation and output from their target values for South Africa over the inflation targeting era. This is achieved using an empirical framework that allows the central bank’s policy preferences to be zone-like as...