The impact of budget deficit on economic growth and its channels in South Africa

What is it about?

One of the most contentious issues in economics is the impact of the budget deficit on economic growth. We demonstrate that South Africa's budget deficit has a negative impact on economic growth. We provide additional evidence that fiscal deficits slow economic growth by reducing public and private physical capital investment as well as gross national savings. The findings show no evidence of a deficit-reduction effect on economic growth via long-term real interest rates.

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