Persistent government budget deficits and government debt have become major concerns in both developed and developing countries. This study investigates the impact of a budget deficit on transport infrastructure investment in South Africa. Quarterly time series data, covering the period 1990q1- 2009q4, was used in this project. The study tests for stationarity using the Augmented Dickey- Fuller and Phillips Perron; it tests for cointegration using the Johansen (1991, 1995) methodology. A vector error correction model is used as an estimation technique. The results of this study show that a budget deficit has a negative impact on transport infrastructure investment in South Africa.

This study examined whether South African government reacted to its debt positions in a sustainable manner during the period 1999 quarter 1 to 2016 quarter 2. Estimation of the fiscal reaction function was conducted by integrating the exogenous short-run impact of monetary policy stance on both primary balance and public debt positions. The VEC model approach was applied to estimate the fiscal reaction function. Results indicate that fiscal policy in South Africa was sustainable during the respective sample period while monetary policy stance had statistically significant impacts on both primary balance and public debt positions. The significant impacts of monetary policy stance on primary balance and public debt show that monetary policy contributes to ensuring fiscal sustainability in South Africa, hence government needs to harmonize monetary efforts in managing public debt. The estimated impact of the business cycle on primary balance positions indicate that fiscal policy was countercyclical in nature. / Economics / M. Com. (Economics)