The bank lending channel of monetary policy transmission in South Africa

Ekaterina Pirozhkova () and Nicola Viegi ()
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Ekaterina Pirozhkova: Métis Lab EM Normandie - EM Normandie - École de Management de Normandie = EM Normandie Business School, South African Reserve Bank
Nicola Viegi: University of Pretoria [South Africa], ERSA - Economic Research Southern Africa

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Abstract: This paper studies the bank lending channel of monetary policy in South Africa. We measure credit supply with homeloan data from banks and nonbanks and we use monetary shocks via high-frequency asset price reactions to policy announcements in a proxy-SVAR model. We find that the bank lending channel is operative, as banks reduce the supply of homeloans after monetary tightening, negatively impacting the housing market. In addition, we show that the deposit channel underpins the bank lending channel's effectiveness. After a monetary tightening, banks widen the deposits spread and the volume of deposits shrinks, as expected. Since retail deposits are vital stable funding for banks, this mechanism drives the lending channel.

Keywords: Housing finance; Nonbank financial institutions; Credit channel; Bank lending channel; Monetary policy transmission (search for similar items in EconPapers)
Date: 2025-12
Note: View the original document on HAL open archive server: https://hal.science/hal-05467839v1
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Published in Quarterly Review of Economics and Finance, 2025, 104, ⟨10.1016/j.qref.2025.102041⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05467839

DOI: 10.1016/j.qref.2025.102041

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