The bank lending channel of monetary policy transmission in South Africa

Ekaterina Pirozhkova and Nicola Viegi

No 11072, Working Papers from South African Reserve Bank

Abstract: This paper studies the bank lending channel of monetary policy transmission in South Africa where the bank loan-level data, which are typically used for this type of analysis, are unavailable. Supply-side changes in credit provision are measured with data on the composition of home-loan supply by banks versus nonbanks. High-frequency surprises in forward rate agreements are used to instrument for exogenous shifts in monetary policy in a proxy-structural vector autoregression model. The bank lending channel is found to be operative, as banks reduce the supply of home loans following monetary tightening, with a negative effect on the housing market. The effectiveness of the deposits channel is shown: banks widen the deposit spread after monetary tightening, and the volume of deposits shrinks. As retail deposits provide a unique, stable source of funding for banks, the deposits channel underlies the operativeness of the bank lending channel in South Africa, consistent with theory.

Date: 2024-11-25
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.resbank.co.za/content/dam/sarb/publica ... -in-south-africa.pdf Revision (application/pdf)

Related works:
Working Paper: The Bank Lending Channel of Monetary Policy Transmission in South Africa (2024)
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:rbz:wpaper:11072

Access Statistics for this paper

More papers in Working Papers from South African Reserve Bank Contact information at EDIRC.
Bibliographic data for series maintained by Jessica VanWyk ().