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An assessment of interest rates on high income earners in South Africa

Author

Listed:
  • Kometsi Kotlele

    (Tshwane University of Technology, Pretoria, South Africa)

  • E. I. Edoun

    (Tshwane University of Technology, Pretoria, South Africa)

  • Vinessa Naidoo

    (Tshwane University of Technology, Pretoria, South Africa)

Abstract

The globalisation phenomenon has enhanced relationship between economies in the world through free market and movement across borders. In such conditions, each government should properly manage and control exchange requirements at domestic and global level through implementation of relevant monetary policies to sustain economic development. Considering the impact of the currency and interest rates on expenditure and/or revenues, this study reports on the results of real interest rates on high income households in South Africa. The study employed the use of quantitative secondary data involving interest rates. Time series data sets on three independent variables over a period of twenty years arising from 1998 to 2018 was used. The data was collected from South African Reserve Bank (SARB) and Statistics South Africa (STATSSA). The statistical bulletins, annual reports and databases were used following permission from the relevant custodians of data from SARB and STATS SA. Data analysis was done using STATA software. The study employed the use of both correlation and linear regression methods of analysis on the changes recorded on how interest rates impact on the behaviour of households for the variables under observation and these are personal transport, household credit and durable goods consumed at the household level. Research findings revealed that a negative relationship exists between real interest rates as adjusted for inflation on the overall consumption of goods in the household level. Furthermore, an increase of the interest rates leads to a decrease in spending while the decrease of interest rates leaves more money in the households for increased spending in all areas of credit consumption and in this case all research variables under study increased with a decreased real interest rate.

Suggested Citation

  • Kometsi Kotlele & E. I. Edoun & Vinessa Naidoo, 2021. "An assessment of interest rates on high income earners in South Africa," Technium Social Sciences Journal, Technium Science, vol. 26(1), pages 1-16, Decembrie.
  • Handle: RePEc:tec:journl:v:26:y:2021:i:1:p:1-16
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    References listed on IDEAS

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    1. Drobyshevsky Sergey & Bozhechkova Alexandra & Trunin Pavel & Sinelnikova-Muryleva Elena, 2017. "The Effect of Interest Rates on Economic Growth," Working Papers wpaper-2017-300, Gaidar Institute for Economic Policy, revised 2017.
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    4. Drobyshevsky Sergey & Bozhechkova Alexandra & Trunin Pavel & Sinelnikova-Muryleva Elena, 2017. "The Effect of Interest Rates on Economic Growth," Published Papers ppaper-2017-303, Gaidar Institute for Economic Policy, revised 2017.
    5. Bakam Fotso & E. I Edoun, 2017. "Critical Assessment of Banking Institutions in South Africa," Journal of Economics and Behavioral Studies, AMH International, vol. 9(2), pages 6-21.
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    7. Marco Di Maggio & Amir Kermani & Benjamin J. Keys & Tomasz Piskorski & Rodney Ramcharan & Amit Seru & Vincent Yao, 2017. "Interest Rate Pass-Through: Mortgage Rates, Household Consumption, and Voluntary Deleveraging," American Economic Review, American Economic Association, vol. 107(11), pages 3550-3588, November.
    8. Mizuho Kida, 2009. "Financial vulnerability of mortgage-indebted households in New Zealand - evidence from the Household Economic Survey," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 72, pages 5-12, March.
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    Cited by:

    1. Jackson, Emerson Abraham & Barrie, Mohamed Samba & Tamuke, Edmund, 2023. "Effectiveness of the Interest Rate Channel of Monetary Policy Transmission Mechanism in Sierra Leone," MPRA Paper 117478, University Library of Munich, Germany, revised 06 May 2023.
    2. Mohammed Faez Hasan & Noor Salah Abdelnaby Al-Ramadan, 2022. "Using Options Futures Derivatives Weather in Hedging," Technium Social Sciences Journal, Technium Science, vol. 31(1), pages 430-436, May.
    3. repec:thr:techub:10031:y:2022:i:1:p:430-436 is not listed on IDEAS

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    More about this item

    Keywords

    Interest rate; regression analysis; households; consumer price index; monetary policy;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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