Investigating the bank lending channel in South Africa : a VAR approach

Loading...
Thumbnail Image

Authors

Ludi, Kirsten L.
Ground, Marc

Journal Title

Journal ISSN

Volume Title

Publisher

University of Pretoria, Department of Economics

Abstract

The monetary policy transmission mechanism can broadly be categorised into three separate channels: the interest rate channel, the credit channel and the other asset price channel. This paper seeks to examine the bank-lending channel of the credit channel of monetary policy in South Africa by making use of structural vector autoregressions (SVAR’s). The pass-through effects of a change in the repurchase (repo) rate on bank deposits and loans and output, are tested using a parsimonious vector error correction model (PVECM). The Johansen (1988) cointegration procedure is used to test for a demand- or supply-driven bank-lending channel. In this way, the validity and effectiveness of the monetary policy regime in South Africa is tested and evaluated.

Description

Keywords

Monetary transmission mechanism, Bank-lending channel, Vector autoregressive (VAR) model, Vector error correction model (VECM), Johansen cointegration test

Sustainable Development Goals

Citation

Ludi, KL & Ground, M 2006, 'Investigating the bank lending channel in South Africa : a VAR approach', University of Pretoria, Department of Economics, Working paper series, no. 2006-04. [http://web.up.ac.za/default.asp?ipkCategoryID=736&sub=1&parentid=677&subid=729&ipklookid=3]