Description
Title: Spend-Tax or Tax-Spend? The Southern African Case
Abstract: The decision of whether to raise taxes or reduce spending has significant policy ramifications, particularly as nations try to deal with the COVID-19 pandemic’s effects. Therefore, the Southern African Development Community (SADC), where worries about escalating debt and deficits were voiced before the pandemic, was the focus of this study’s investigation of the relationship between revenues and spending. Annual frequency data for the years 1980–2018 were examined using a panel bootstrap Granger-causality method. To the best of our knowledge, this was the first study in Africa to take both cross-country variations and cross-section dependence into account. In-depth adjustments to budgetary equilibria and fiscal policy are affected by the study’s findings. In eleven SADC member states, the study found no evidence of a causal relationship between revenues and spending, indicating that governments in these nations can change either spending or revenues, or both, to balance their respective budgets. The tax-spend hypothesis, which contends that governments should think about changing revenues to address budget imbalances, was supported in Botswana, though. Last but not least, evidence supporting the spend-tax hypothesis was discovered in Mozambique and Mauritius, indicating that revenues in these nations are driven by past and present expenditures. Therefore, reducing spending would be the best course of action to address the budgetary imbalance.
Keywords: SADC; revenues; starve the beast; deficits
Paper Quality: SCOPUS / Web of Science Level Research Paper
Subject: Economics
Writer Experience: 20+ Years
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