The Impact of Fiscal Policy on Economic Growth In The Southern Africa Region: A Spatial Econometric Approach
DOI:
https://doi.org/10.31947/jakpp.v10i2.36090Keywords:
fiscal policy, tax revenues, government expenditures, public debt, economic growth, spillover effectsAbstract
This spatial analysis examines the relationship between fiscal policy and economic growth in the Southern African Development Community (SADC). Using econometric techniques on data from 2000-2017 across 12 member states, the study reveals that tax revenue negatively impacts the economic growth of neighbouring countries, highlighting harmful tax competition. It emphasises the need for coordinated regional tax policies to foster sustainable growth and manage public debt levels. The findings provide insights for SADC nations to enhance fiscal policy frameworks and promote regional cooperation for shared prosperity.
References
Ade, M., Rossouw, J., & Gwatidzo, T. (2017). Analysis of Tax Harmonisation in the SADC. Working Papers 684, Economic Research Southern Africa.
African Development Bank. (2018). Southern Africa Economic Outlook. Abidjan: African Development Bank Group.
Amusa, K., & Oyinlola, M. A. (2019). The Effectiveness of Government Expenditure on Economic Growth in Botswana. African Journal of Economic and Management Studies, 10(3), 368-384.
Anselin, L. (1988). Spatial Econometrics: Methods and Models (1st ed.). Netherlands: Kluwer Academic Publishers.
Anselin, L., Bera, A. K., & Yoon, M. J. (1996). Simple Diagnostic Tests for Spatial Dependence. Regional Science and Urban Economics, 26(1), 77-104.
Arellano, M. (2003). Panel Data Econometrics (1 ed.). New York: Oxford University Press.
Ash, M., Basu, D., & Dube, A. (2017). Public Debt and Growth: An Assessment of Key Findings on Causality and Thresholds. Working Paper, No. 2017-10, University of Massachusetts, Department of Economics, Amherst, MA.
Auerbach, A. J., & Gorodnichenko, Y. (2013). Output Spillovers from Fiscal Policy. American Economic Review, 103(3), 141–146.
Bank of Botswana . (2008). Annual Report 2008. Gaborone : Bank of Botswana .
Barro, J. M. (1990). Government Spending in a Simple Model Endogenous Growth. The Journal of Political Economy, 98(5), 103-125.
Barro, J. R., & Sala-i-Martin, X. (1992). Public Finance in Models of Economic Growth. Oxford University Press, 59(4), 654-661.
Case, A. C., Rosen, H. S., & Hines, J. R. (1993). Budget Spillovers and Fiscal Policy Interdependence: Evidence from the States. Journal of Public Economics, 52(3), 285-307.
Cecchetti, S., Mohanty, M., & Zampolli, F. (2011). Achieving Growth Amid Fiscal Imbalances: The Real Effects of Debt. BIS Working Paper No.352.
Checherita-Westphal, C., & Rother, P. (2011). The Impact of Government Debt on Growth. Revue économique, 62(6), 1015-1029.
Connolly, M., & Li, C. (2016). Government Spending and Economic Growth in OECD Countries. Journal of Economic Policy Reform, 19(4), 386-395.
Darrat, F. A. (1998). Tax and Spend or Spend and Tax: An Inquiry into the Turkish Budgetary Process. Southern Economic Journal, 64(4), 940-956.
Daud, S. N., & Podivinsky, J. M. (2012). Revisiting The Role of External Debt in Economic Growth of Developing Countries. Journal of Business Economics and Management, 13(5), 968-993.
Dritsaki, C., & Dritsaki, M. (2010). Government Expenditure and National Income: Causality Tests for Twelve New Members of E.E. The Romanian Economic Journal, 13(38), 67-89.
Egbunike, F. C., Emudainohwo, O. B., & Gunardi, A. (2018). Tax Revenue and Economic Growth: A Study of Nigeria and Ghana. Jurnal IImu Ekonomi, 7(2), 2476-9223.
Elhorst, P. J. (2010). Applied Spatial Econometrics: Raising the Bar. Applied Spatial Econometrics, 5(1), 9-28.
Elhorst, P. J. (2014). Spatial Econometrics From Cross-Sectional Data to Spatial Panels. London: Springer.
Engen, E. M., & Skinner, J. (1992). Fiscal Policy and Economic Growth. NBER Working Paper No. 4223.
Engen, E., & Skinner, J. (1996). Taxation and Economic Growth. National Tax Association, 49(4), 617-642.
Ertur, C., & Koch, W. (2007). Growth, Technological Interdependence and Spatial Externalities: Theory and Evidence. Journal of Applied Econometrics, 22(6), 1033-1062.
Fajgelbaum, P. D., Morales, E., Serrato, J. C., & Zidar, O. M. (2015). State Taxes and Spatial Misallocation. NBER Working Paper No. 21760.
Flores-Chamba, J., Correa-Quezada, R., Álvarez-García, J., & Río-Rama, M. (2019). Spatial Economic Convergence and Public Expenditure in Ecuador. Symmetry, 11(2), 130.TAX REV
Ganau, R. (2017). Institutions and Economic Growth in Africa: A Spatial Econometric Approach. Economia Politica: Journal of Analytical and Institutional Economics, 34(3), 425-444.
Geys, B. (2006). Looking Across Borders: A Test of Spatial Policy Interdependence Using Local Government Efficiency Ratings. Journal of Urban Economics, 60(3), 443-462.
Goffman, J. J. (1968). On the Empirical Testing of Wagner's law: A Technical Note. Public Finance/ Finances Publiques, 3(3), 359-364.
Golgher, A. B., & Voss, P. R. (2016). How to Interpret the Coefficients of Spatial Models: Spillovers, Direct and Indirect Effects. Spatial Demography, 4(3), 175-205.
Goujard, A. (2013). Cross-Country spillovers from Fiscal Consolidations OECD. OECD Economics Department Working Papers, No.1099, OECD Publishing.
Gujarati, D. N., & Porter, D. C. (2009). Basic Econometrics (5th ed.). New York : McGraw-Hill Education .
Gumus, E., & Mammadov, R. (2019). Growth in the Southern Caucasus Countries: A Panel Data Analysis. Khazar Journal of Humanities and Social Sciences, 22(2), 20-34.
Gupta, S. P. (1967). Public Expenditure and Economic Growth: A Time Series Analysis. Public Finance/ Finances Publiques, 22(4), 423–461.
Herndon, T., Ash, M., & Pollin, R. (2014). Does High Public Debt Consistently Stifle Economic Growth? Cambridge Journal of Economics , 38(2), 257-279.
Jayaraman, T. K., & Lau , E. (2009). Does external debt lead to economic growth in Pacific island countries. Journal of Policy Modeling, 31, 272-288.
Karjoo, Z., & Sameti, M. (2015). Spatial Analysis Effect of Government Expenditures on Economic Growth. Regional Science Inquiry, 7(1), 47-54.
Kharushi, S. A., & Ada, M. S. (2018). External Debt and Economic Growth: The Case of Emerging Economy. Journal of Economic Integration, 33(1), 1141-1157.
Khumbuzile, D., & Khobai, H. (2018). The impact of Taxation on Economic Growth in South Africa. Munich Personal RePEc Archive, MPRA Paper No. 86219.
Kopczewska, K., Kudła, J., Walczyk, K., Kruszewski, R., & Kocia, A. (2016). Spillover Effects of Taxes on Government Debt: A Spatial Panel Approach. Policy Studies, 37(3), 274-293.
Kopczewska, K., Kudla, J., & Walczyk, K. (2017). Strategy of Spatial Panel Estimation: Spatial Spillovers Between Taxation and Economic Growth. Applied Spatial Analysis and Policy, 10(1), 77–102.
Kumar, M. S., & Woo, J. (2010). Public Debt and Growth. IMF Working Paper , 1-47.
Kweka, J., & Morrissey, O. (2000). Government spending and economic growth in Tanzania, 1965 - 1996 (No. 00/6). CREDIT Research Paper.
Langer, S. (2019). Expenditure Interactions Between Municipalities and the Role of Agglomeration Forces: A Spatial Analysis for North Rhine-Westphalia. The Annals of Regional Science, 62(3), 497-527.
Lee, L. F., & Yu, J. (2010). Estimation of Spatial Autoregressive Panel Data Models with Fixed Effects. Journal of Econometrics, 154(2), 165-185.
LeSage, J. P. (1999). The Theory and Practice of Spatial Econometrics. University of Toledo. Toledo, Ohio, 28(11).
LeSage, J., & Dominguez, M. (2012). The Importance of Modelling Spatial Spillovers in Public Choice Analysis. Public Choice, 150(3), 525-545.
LeSage, J., & Fischer, M. (2008). Spatial Growth Regressions: Model Specification, Estimation and Interpretation. Spatial Economic Analysis, 3(3), 275-304.
LeSage, J., & Pace, R. K. (2009). Introduction to Spatial Econometrics (1 ed.). London: Taylor and Francis/CRC.
LeSage, J., & Pace, R. K. (2014). The Biggest Myth in Spatial Econometrics. Econometrics, 2(4), 217-249.
Lien, N. P., & Thanh, S. D. (2017). Tax Revenue, Expenditure, and Economic Growth: An Analysis of long-run relationships. Journal of Economic Development, 24(3), 4-26.
Loizides, J., & Vamvoukas, G. (2005). Government Expenditure and Economic Growth: Evidence from Trivariate Causality Testing. Journal of Applied Economics, 8(1), 125-152.
Lupu, D., Petrisor, B. M., Bercu, A., & Tofan, M. (2018). The Impact of Public Expenditures on Economic Growth: A Case Study of Central and Eastern European Countries. Emerging Markets Finance and Trade, 54(3), 552-570.
Mann, A. J. (1980). Wagner’s law: An Econometric test for Mexico 1925–1976. National Tax, 33(2), 189–201.
Mazorodze, B. T. (2018). Government Expenditure and Economic Growth in Zimbabwe. African Journal of Business and Economic Research (AJBER), 13(2), 183-202.
Myovella, G. A. (2018). Socio-economic Factors that Determine Employment in Tanzania: Spatial Analysis. Business and Economic Research, 8(1), 154-163.
Nantob, N. (2014). Taxes and Economic Growth in Developing Countries: A Dynamic Panel Approach. MPRA Paper 61346, University Library of Munich, Germany, revised 05 Feb 2015.
Narayan, P. K., & Narayan, S. (2006). Government Revenue and Government Expenditure Nexus: Evidence from Developing Countries. Applied Economics, 38(3), 285-291.
Niebuhr, A. (2002). Spatial Dependence of Regional Unemployment in the European Union (No. 186). HWWA Discussion Paper.
Ojede, A., Atems, B., & Yamarik, S. (2018). The Direct and Indirect (Spillover) Effects of Productive Government Spending on State Economic Growth. Growth and Change, 49(1), 122-141.
Panizza, U., & Presbitero, A. F. (2013). Public Debt and Economic Growth in Advanced Economies: A survey. Swiss Journal of Economics and Statistics, 149(2), 175–204.
Peacock, A. T., & Wiseman, J. (1961). Front matter, the growth of public expenditure in the United Kingdom. In The growth of public expenditure in the United Kingdom, 32-40. Princeton University Press.
Perotti, R. (2004). Estimating the Effects of Fiscal Policy in OECD Countries. IGIER, Working paper No.276, Bocconi University .
Quashigah, P. O., Ofori-Abebrese, G., & Pickson, B. R. (2016). Empirical Analysis of the Potency of Fiscal Policy on Economic Growth in Ghana. International Research Journal of Finance and Economics, 25-37.
Reinhart, C. M., & Rogoff, K. S. (2010). Growth in a Time of Debt. American economic review, 100(2), 573–578.
Roşoiu, L. (2019). The Impact of Public Debt on Economic Growth. Cross-Cultural Management Journal, 21(1), 73-78.
Segura, J. I. (2017). The Effect of State and Local Taxes on Economic Growth: A Spatial Dynamic Panel Approach. Papers in Regional Science, 96(3), 627-645.
Senadza, B., Fiagbe, K. A., & Quartey, P. (2018). The Effect of External Debt on Economic Growth In Sub-Saharan Africa. International Journal of Business and Economic Sciences Applied Research, 11(1), 61-69.
Shafuda, C. P., & De, U. K. (2020). Government Expenditure on Human Capital and Growth in Namibia: A Time Series Analysis. Journal of Economic Structures , 21(9), 1-14.
Solow, R. M. (1956). A Contribution to the Theory of Economic Growth. The Quarterly Journal of Economics, 70(1), 65-94.
Stoilova, D., & Patonov, N. (2012). An Empirical Evidence for the Impact of Taxation on Economy Growth in the European Union. Tourism & Management Studies, 1031-1039.
Tiebout, C. M. (1956). A Pure Theory of Local Expenditures. Journal of Political Economy, 64(5), 416-424.
Tobler, W. R. (1970). A Computer Movie Simulating Urban Growth in the Detroit Region. Economic Geography, 46(sup1), 234-240.
United Nations University. (2019, March 8). UNU-WIDER: Government Revenue Dataset. Retrieved from https://www.wider.unu.edu/project/government-revenue-dataset
Vega, S. H., & Elhorst, P. J. (2013). On Spatial Econometric Models, Spillover Effects, and W. In 53rd ERSA Congress, Palermo, Italy.
Wagner, A. (1883). Three Extracts on Public Finance, translated and reprinted in RA Musgrave and AT Peacock. Classics in the.
Wolde-Rufael, Y. (2008). The Revenue–Expenditure Nexus: The Experience of 13 African Countries. African Development Review, 20(3), 273-283.
Woo, J., & Kumar, M. S. (2015). Public Debt and Growth. Econometrica, 82(328), 705-739.
World Bank Development Indicators . (2019, January 3). World Bank Open Data | Data. Retrieved from https://databank.worldbank.org/source/world-development-indicators
Downloads
Published
Issue
Section
License
Copyright (c) 2024 Katlego Tseladikae, Narain Sinha, Zibanani Kahaka
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
