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- Title
THE MONETARY-FISCAL POLICY MIX IN SOUTH AFRICA.
- Authors
Swanepoel, Jan A.
- Abstract
This article discusses the South African monetary and fiscal policy stance over the business cycle since fiscal 1972-73 and considers the question of whether these policies were coordinated or uncoordinated over the years. Effective macroeconomic management presupposes a well-knit and coordinated fiscal and monetary policy environment, since fiscal policy has a close bearing on the conduct of monetary policy. In the short term, fiscal policy has an impact on the management of monetary policy and inflation, while fiscal sustainability is required in the long term to ensure monetary independence. This study highlights the need for continued caution in the use of discretionary fiscal policy as it can, when poorly implemented, affect macroeconomic stability adversely. Discretionary fiscal policy should explicitly take into account the cyclical position of the economy and its effect on the government budget. A particular concern in the South African context with regard to automatic stabilization is the downward trend in the contribution of direct taxes to the total cyclical component of the budget balance.
- Subjects
SOUTH Africa; FISCAL policy; MONETARY policy; ECONOMIC policy; PUBLIC spending; MACROECONOMICS; SOUTH African economy
- Publication
South African Journal of Economics, 2004, Vol 72, Issue 4, p730
- ISSN
0038-2280
- Publication type
Article
- DOI
10.1111/j.1813-6982.2004.tb00132.x