What Role Do Non-performing Loans Play in Propagating the Excess Liquid Asset Holdings Shock Effects on Sectoral Credit Re-allocation?

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

Chapter Chapter 24 in Achieving Price, Financial and Macro-Economic Stability in South Africa, 2021, pp 373-380 from Springer

Abstract: Abstract Do the excess liquid asset holdings (LAH) of banks matter for the transmission of adverse financial shock effects to credit growth and GDP growth? The increase in excess LAH moved one-to-one with credit growth to government. Evidence shows that an adverse financial shock lowers credit growth and GDP growth and excess LAH resulted in a more pronounced decline for the sample period 2008Q1 to 2015Q4. Excess LAH was a drag on credit growth more during 2008Q1 to 2015Q4 compared to the 2000Q1 to 2015Q4. Positive shocks to excess LAH did impact the share of credit to households and companies, and the effects differed between 2000Q1 to 2015Q4 and 2008Q1 to 2015Q4. During 2000Q1 to 2015Q4, a positive excess LAH shock increased credit to the households and companies compared to a decline during 2008Q1 to 2015Q4. Furthermore, the non-performing loans (NPLs) dampened the increases in the share of credit to households due to a positive shock to excess LAH. This means that NPLs accentuated the contraction in the share of credit to households. The adverse shock effects of excess LAH on sector credit allocation were exacerbated by the increase in credit risk as captured by the NPLs.

Date: 2021
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-66340-7_24

Ordering information: This item can be ordered from
http://www.springer.com/9783030663407

DOI: 10.1007/978-3-030-66340-7_24

Access Statistics for this chapter

More chapters in Springer Books from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().