South Africa has been experiencing slower growth and deteriorating public finances. In an attempt to mitigate the slowdown, fiscal spending reached 30% of GDP in 2019, rapidly swelling public debt from 26% in 2008 to 63% of GDP in 2019.

Two opposite views on the role of fiscal policy have emerged. On the one hand supply-side constraints and tight fiscal space require debt consolidation, and on the other, low demand and high unemployment allow for non-inflationary stimulus.

This research aims to create better estimates of fiscal multipliers in order to support the design of optimal fiscal actions.

1. what has the average value of the multiplier been since 1994, and did it peak during recessions or booms?
2. how are the business cycle and credit volume related?
3. how does the multiplier behave during a monetary contraction, and is this different during recessions?