Fiscal policy developments and the minerals industry

Raputsoane, Leroi (2024): Fiscal policy developments and the minerals industry.

Abstract

This study analyses the reaction of the minerals industry to fiscal policy developments in South Africa. This is achieved by augmenting a Taylor rule type central bank monetary policy reaction function with Government expenditure. According to the results, an unexpected, or surprise, increase in Government expenditure causes output of the minerals industry to decrease slightly and bottom out after 9 months, where it then gradually increase and tends towards its equilibrium, or steady state, level after 17 months. Conversely, an unexpected increase in output of the minerals industry causes Government expenditure to decrease and bottom out after 13 months, where it recovers and subsequently increases before it progressively and tends towards its equilibrium, or steady state, level after 23 months. However, the effect of surprise increase in Government spending on output of the mining industry is statistically insignificant in all periods, while the effect surprise increase on output of the mining industry is statistically significant immediately and such effect lasts up to 19 months. The results are generally consistent with countercyclical fiscal policy, hence Government should continue to monitor and manage spending to support overall economic activity as well as the minerals industry.

• Item Type: MPRA Paper
• Language: English
• Keywords: Fiscal policy, Minerals industry, Economic cycles
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C11 - Bayesian Analysis: General; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; L - Industrial Organization > L7 - Industry Studies: Primary Products and Construction > L72 - Mining, Extraction, and Refining: Other Nonrenewable Resources

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