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Essays on monetary policy and banking
The size of the nancial sector in South Africa has grown signi cantly over the past fi fteen years to now almost three times the size of the economy. Parallel to that growth is the growth of the banking sector, speci cally the six commercial banks that dominate the sector. This expansion has bot...
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| Format: | Thesis |
| Language: | English |
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University of Pretoria
2018
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| _version_ | 1867613622657613825 |
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| access_status_str | Open Access |
| author2 | Viegi, Nicola |
| author_browse | Viegi, Nicola |
| author_facet | Viegi, Nicola |
| collection | Thesis |
| dc_rights_str_mv | © 2018 University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria. |
| description | The size of the nancial sector in South Africa has grown signi cantly over the past
fi fteen years to now almost three times the size of the economy. Parallel to that
growth is the growth of the banking sector, speci cally the six commercial banks
that dominate the sector. This expansion has both monetary policy and financial
stability implications.
The objectives of this PhD are to: (1) study the importance of internal and
external variables for nancial stability; (2) determine the role of the structure
of the banking sector in the transmission of monetary policy and macroeconomic
shocks; and (3) understand financial stability in the context of both the South
African financial system structure and demographic dynamics.
We start with a cross-sectional analysis of how external and internal variables
affect local fi nancial stability. We fi nd that local variables such as credit, stock
market capitalisation and real exchange rate growth are better candidates for understanding
local fi nancial stability for both the high and the upper middle income
countries.
Next we explore monetary policy and financial stability in the context of the
South African banking system structure and socio-economic dynamics. An empirical
analysis of the bank lending channel indicate that the effect of monetary policy
is asymmetric - small banks are more affected by a contractionary monetary policy,
whereas the big banks can adjust their loan portfolios to cushion the effects. However,
these results (as well as the current South African literature) assume that the
transmission of monetary policy and the way the exogenous shocks are generated
have remained constant over time. We show that following the 2008 fi nancial crisis,
both the big banks and small banks became more responsive to a monetary policy
shock.
We then develop a dynamic stochastic general equilibrium model to analyse -
financial stability for the South African banking sector. The main elements to capture
the socio-demographic characteristics include banking and household heterogeneity.
We incorporate the relative consumption motive to capture the culture of "keeping
up with the Joneses" that has resulted in high consumption driven by debt. The
heterogeneity of the banking sector is motivated by the structure of the banking
sector, which has enabled the existence of the big and the small banks serving the
high-income and low-income households respectively. We calibrate the model using
South African data. Our model shows that liquidity injections in the presence of
the relative consumption motive increase loan demand whilst adverse shocks to the
banks' balance sheets have welfare effects, especially for low-income households. |
| format | Thesis |
| id | oai:repository.up.ac.za:2263/67770 |
| institution | University of Pretoria (South Africa) |
| language | English |
| last_indexed | 2026-06-10T12:39:04.809Z |
| license_str | Other — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from UPSpace — University of Pretoria Institutional Repository |
| publishDate | 2018 |
| publishDateRange | 2018 |
| publishDateSort | 2018 |
| publisher | University of Pretoria |
| publisherStr | University of Pretoria |
| record_format | dspace |
| source_str | UPSpace — University of Pretoria Institutional Repository |
| spelling | oai:repository.up.ac.za:2263/67770 Essays on monetary policy and banking Viegi, Nicola tumisang.loate@gmail.com Loate, Tumisang Bertha Unrestricted UCTD The size of the nancial sector in South Africa has grown signi cantly over the past fi fteen years to now almost three times the size of the economy. Parallel to that growth is the growth of the banking sector, speci cally the six commercial banks that dominate the sector. This expansion has both monetary policy and financial stability implications. The objectives of this PhD are to: (1) study the importance of internal and external variables for nancial stability; (2) determine the role of the structure of the banking sector in the transmission of monetary policy and macroeconomic shocks; and (3) understand financial stability in the context of both the South African financial system structure and demographic dynamics. We start with a cross-sectional analysis of how external and internal variables affect local fi nancial stability. We fi nd that local variables such as credit, stock market capitalisation and real exchange rate growth are better candidates for understanding local fi nancial stability for both the high and the upper middle income countries. Next we explore monetary policy and financial stability in the context of the South African banking system structure and socio-economic dynamics. An empirical analysis of the bank lending channel indicate that the effect of monetary policy is asymmetric - small banks are more affected by a contractionary monetary policy, whereas the big banks can adjust their loan portfolios to cushion the effects. However, these results (as well as the current South African literature) assume that the transmission of monetary policy and the way the exogenous shocks are generated have remained constant over time. We show that following the 2008 fi nancial crisis, both the big banks and small banks became more responsive to a monetary policy shock. We then develop a dynamic stochastic general equilibrium model to analyse - financial stability for the South African banking sector. The main elements to capture the socio-demographic characteristics include banking and household heterogeneity. We incorporate the relative consumption motive to capture the culture of "keeping up with the Joneses" that has resulted in high consumption driven by debt. The heterogeneity of the banking sector is motivated by the structure of the banking sector, which has enabled the existence of the big and the small banks serving the high-income and low-income households respectively. We calibrate the model using South African data. Our model shows that liquidity injections in the presence of the relative consumption motive increase loan demand whilst adverse shocks to the banks' balance sheets have welfare effects, especially for low-income households. Economics PhD Unrestricted 2018-12-05T08:04:53Z 2018-12-05T08:04:53Z 2009/05/18 2018 Thesis Loate, TB 2018, Essays on monetary policy and banking, PhD Thesis, University of Pretoria, Pretoria, viewed yymmdd <http://hdl.handle.net/2263/67770> S2018 http://hdl.handle.net/2263/67770 en © 2018 University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria. application/pdf University of Pretoria |
| spellingShingle | Unrestricted UCTD Essays on monetary policy and banking |
| title | Essays on monetary policy and banking |
| title_full | Essays on monetary policy and banking |
| title_fullStr | Essays on monetary policy and banking |
| title_full_unstemmed | Essays on monetary policy and banking |
| title_short | Essays on monetary policy and banking |
| title_sort | essays on monetary policy and banking |
| topic | Unrestricted UCTD |
| url | http://hdl.handle.net/2263/67770 |