Template-Type: ReDIF-Paper 1.0
Author-Name: Ekaterina Pirozhkova
Author-Name: Nicola Viegi 
Title: The bank lending channel of monetary policy transmission in South Africa
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.
Creation-Date: 2024-11-25
File-URL: https://www.resbank.co.za/content/dam/sarb/publications/working-papers/2024/the-bank-lending-channel-of-monetary-policy-transmission-in-south-africa.pdf
File-Format: application/pdf
File-Function: Revision
Number: 11072
Handle: RePEc:rbz:wpaper:11072