Abstract:
The question of fiscal sustainability is very important for adequate macroeconomic
management. This paper analyses the sustainability of the government of South Africa’s fiscal policies during the period 1990-2005 using quarterly data. It is found that
government revenue, government spending on goods and services, and interest payment
are non-stationary but cointegrated. A standard three-variable framework of Vector Error Correction (VEC) model is used to test whether data from the historical process in South
Africa are consistent with the intertemporal government budget constraint. The present value constraint (PVC) approach was the main tool used in the empirical analysis. The
findings suggest that the PVC hold over the sample period and point to the sustainability
of the historical fiscal process.
