Fiscal–Macro Connectedness in South Africa: A Time–Frequency Analysis

This study examines fiscal–macro connectedness in South Africa using a time–frequency spillover framework. Employing the Diebold–Yilmaz time-domain and Baruník–Křehlík frequency-domain approaches, we analyse dynamic interactions among public debt, government expenditure, tax revenue, interest rates, and private consumption over the period 1960Q1–2025Q1. The results reveal substantial time-varying connectedness, with spillovers intensifying during periods of macroeconomic stress. Frequency decomposition shows that long-run components dominate the transmission mechanism, reflecting the persistent nature of fiscal dynamics. Directional measures indicate that government expenditure and interest rates act as key transmitters of shocks, while private consumption and tax revenue primarily absorb shocks. These findings highlight the structural role of fiscal variables in shaping macroeconomic dynamics and underscore the importance of fiscal credibility and coordination with monetary policy. The results provide policy-relevant insights into the design of sustainable fiscal strategies in emerging economies.