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The bank lending channel of monetary policy transmission in South Africa

Author

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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)

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.

Suggested Citation

  • Ekaterina Pirozhkova & Nicola Viegi, 2025. "The bank lending channel of monetary policy transmission in South Africa," Post-Print hal-05467839, HAL.
    • Handle: RePEc:hal:journl:hal-05467839
    DOI: 10.1016/j.qref.2025.102041
    Note: View the original document on HAL open archive server: https://hal.science/hal-05467839v1
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