The effects of government spending shocks on income distribution in South Africa

PurposeThe main aim of this study is to examine the effect of government spending and its components' shocks on the distribution of income between labour and capital in South Africa for the period between 1994Q2 and 2019Q3.Design/methodology/approachThe effects of government spending shocks on income distribution are analysed using Jordà's (2005) local projection method. The shocks, however, are identified by applying short-run contemporaneous restrictions in a vector autoregressive model based on Cholesky identification scheme.FindingsThe results indicate that government spending shock has a positive and significant effect on labour share after the first quarter. This means that expansionary government spending has a paramount role in reducing income inequality in the economy. Both government investment and government consumption shocks have also contributed to a reduction in income inequality, though the magnitude effect is smaller for government consumption.Originality/valueResearch findings on the effects of government spending shock on income inequality are still inconclusive. Therefore, this research examines the effect of total government spending shock along with its components on labour income share for the South African economy.

The effects of government spending shocks on real exchange rate in Ethiopia

PurposeGovernment spending has inconclusive effect on real exchange rate. From the very beginning neoclassical economists argued that a rise in government spending brings depreciation in real exchange rate while neo-Keynesians claimed that government spending appreciates real exchange rate. Hence, the main purpose of this paper is to examine the effect of government spending shock and its components' shocks, namely government consumption and government investment on real exchange rate over the period 2001Q1–2016Q1 for Ethiopia.Design/methodology/approachTo examine the effects of government spending shocks on real exchange rate, Jordà's (2005) local projection method is employed in this study. The exogenous shocks, however, are identified recursively in a vector autoregressive model.FindingsThe impulse responses show that government spending shock leads to a statistically significant appreciation of real exchange rate in Ethiopia. This evidence supports the neo-Keynesian school of thought who predicts an appreciation of real exchange rate from a rise in government spending. While government investment shock depreciates real exchange rate on impact insignificantly, government consumption shock appreciates real exchange rate in this small open economy.Originality/valueThis research contributes to the scarce literature on the effect of fiscal policy shock on real exchange rate in small open economies like Ethiopia.

Government spending shocks and economic growth: additional evidence from cyclical behavior of fiscal policy

PurposeThis study examines the asymmetric effect of government spending on economic growth in Nigeria over the period 1980–2017. Specifically, this study investigates whether the response of economic growth to government spending shocks differs according to the nature of shocks on them. In addition, the authors examine whether the stabilizing effects of fiscal policies are dependent on the state of the business cycle.Design/methodology/approachThe study adopts the linear fiscal reaction function in addition to the nonlinear regression model of Hatemi-J (2011, 2012), Granger and Yoon (2002), which allows us to separate negative shocks from positive shocks to government spending. Similarly, the authors adopt the generalized method of moments (GMM) techniques of Hansen (1982) to account for simultaneity and endogeneity problems inherent in dynamic model.FindingsThe authors’ findings reveal that there is evidence of asymmetry in the government spending–economic growth nexus in Nigeria over the period of study. Specifically, the authors find that the response of economic growth to government spending shocks differs according to the nature of shocks on them. More specifically, the study established that the stabilizing effects of fiscal policies are dependent on the state of the business cycle.Originality/valueUnlike the traditional method of modeling asymmetry, which adopts the simple inclusion of a squared government spending term or by the inclusion of a cubic government spending term, the model adopted in this study allows us to model shocks and show how the responses of economic growth to government expenditure differ according to the nature of shocks on them.

Government Spending Shocks and External Competitiveness: Evidence from South Africa

This study examines the effects of government spending shocks on real effective exchange rate in South Africa over the period 1970Q1–2019Q2. In doing so, a version of vector autoregressive impulse response model developed by Jordà is employed and the shocks are identified recursively. The impulse responses show that government spending shock has a significant appreciation effect on real effective exchange rate and its effect depends on the nature of the fiscal shock. Although the effect of government spending on real effective exchange rate does not depend on the sign of the shock, it varies over economic cycle.

KAUSALITAS SERTA RESPONS PEREKONOMIAN, BELANJA PEMBANGUNAN TELEKOMUNIKASI PUBLIK DAN PENELITIAN PENGEMBANGAN DI INDONESIA

: This study aims to see causal relationship and response between the economy, public telecommunications development spending and research development expenditure in Indonesia. This study using a data starting from 1988-2019, using the Vector Autoregression (VAR) processing method. The results of this study indicate that: (1) There is no causality or reverse relationship between public telecommunications development spending and research development expenditure in Indonesia, (2) There is no causality relationship between research development expenditure and the economy in Indonesia, but there is a one-way relationship from the economy to research development expenditure in Indonesia, (3) There is a two-way causality relationship between public telecommunications development spending and economy in Indonesia, (4) There is an economic response due to public telecommunications development spending and research development expenditure shocks in Indonesia (5) There is a response to public telecommunications development spending due to economic and research development spending shocks in Indonesia (6) There is a response to research development spending due to economic and public telecommunications development spending shocks in Indonesia.Keyword : Economy, Public Telecommunications Development Spending and Research Development Expenditure