Large-Scale Asset Purchases and Activity in the Primary and Secondary Share and Bond Markets

Nombulelo Gumata () and Eliphas Ndou
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Nombulelo Gumata: South African Reserve Bank

Chapter Chapter 19 in Achieving Price, Financial and Macro-Economic Stability in South Africa, 2021, pp 299-312 from Springer

Abstract: Abstract Do large-scale asset purchases affect activity in the primary and secondary share and bond markets? Evidence in this chapter shows that the primary and secondary bond and share market activity indicators increase in response to positive South African Reserve Bank (SARB) asset growth shocks. Furthermore, the results indicate that incremental positive shocks to SARB asset growth exert asymmetric effects on selected primary and secondary market share and bond market indicators. In addition, we establish that SARB asset growth propagates the effects of positive manufacturing production growth shocks to activity in the primary and secondary share markets. The two-year Corporate Default Swap (CDS) spreads and the yield on the Eskom bond decline in response to positive SARB asset growth shocks, whilst the bond market capitalisation and liquidity increase. On the other hand, positive shocks to SARB asset growth loosen the credit conditions and this is transmitted to increases in the manufacturing output growth.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-66340-7_19

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DOI: 10.1007/978-3-030-66340-7_19

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