Adjusting South Africa's fiscal balance for terms-of-trade effects

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Periodical article

Title:	Adjusting South Africa's fiscal balance for terms-of-trade effects
Author:	Swanepoel, Jan A.
Year:	2007
Periodical:	South African Journal of Economics
Volume:	75
Issue:	4
Pages:	719-727
Language:	English
Geographic term:	South Africa
Subjects:	terms of trade balance of payments public revenue
External link:	https://onlinelibrary.wiley.com/doi/10.1111/j.1813-6982.2007.00142.x/pdf
Abstract:	Standard output gap-based calculations and interpretations of the cyclical component of the fiscal balance may convey a misleading picture in countries such as South Africa which experience substantial movements in their terms of trade. This paper therefore adjusts South Africa's general government primary balance for terms-of-trade effects by means of an alternative calculation of the transitory component based on a measure of the real-income gap rather than the real-output gap. The results indicate that measures of the cyclical component of the budget balance based on real-income and real-output gaps generally yield broadly similar results over history, but during exceptional periods of rapid changes in commodity prices, the measures can be very different. Bibliogr., ref., sum. [Journal abstract]