FISCAL POLICY AND ECONOMIC GROWTH NEXUS IN SADC COUNTRIES: A SPATIAL ECONOMETRIC APPROACH
Date
2020-12-06
Authors
TSELADIKAE, KATLEGO DANNY
Journal Title
Journal ISSN
Volume Title
Publisher
UNIVERSITY OF BOSTWANA
Abstract
This study pursued an empirical investigation on the nexus between fiscal policy and economic
growth in SADC countries with special reference to spatial analysis. Econometric approach
employed in the study is based on the data spanning from 2000-2017 considering twelve
countries in the SADC region. The study uses both the traditional and spatial econometric
approaches to map channels through which fiscal variables affect economic growth
considering individual countries and the region as a whole. The empirical evidence from the
country-level analysis is mixed but substantial across economies. The Toda and Yamamoto
causality followed for individual countries supports the adoption of different hypotheses to
address fiscal variables. However, the panel causality test proposed by Dumitrescu and Hurlin
(2012) suggested the use of the tax-spend hypothesis. The investigation of spillover effects
through the spatial modelling suggested that tax revenue in the region negatively affected other
contiguous countries due to spatial interaction. The recommendations were that the countries
should adopt tax harmonization policies and that tax revenues and government spending
decisions should be reconciled. Boosting economic growth for the region remains vital since it
influences the evolution of debt levels.