This study provides evidence of the relationship between bank-granted credit and
business cycles in South Africa. The study is conducted in three phases, namely
qualitative research (Phase I), quantitative research (Phase II) and econometric analysis
(Phase III). A sequential (connected data) mixed methodology (Phase I and II) is used to
collect and analyze primary data from market participants. The qualitative research
(Phase I) involves structured interviews with influential or well informed people on the
subject matter. Phase I of the study is used to understand the key determinants of bank
credit in South Africa and to appreciate how each of the credit aggregates behaves during
alternate business cycles. Qualitative survey results suggest key determinants of
commercial bank credit in South Africa as economic growth, collateral value, bank
competition, money supply, deposit liabilities, capital requirements, bank lending rates
and inflation. The qualitative results are used to formulate questions of the structured
survey questionnaire (Quantitative research- Phase II). The ANOVA and Pearman’s
product correlation analysis techniques are used to assess relationship between variables.
The quantitative results show that there is direct and positive relationship between bank
lending behavior and credit aggregates namely economic growth, collateral value, bank
competition and money supply. On the other hand, the results show that there is a
negative relationship between credit growth and bank capital and lending rates. Overall,
the quantitative findings show that bank lending in South Africa is procyclical. The
survey results indicate that the case for demand-following hypothesis is stronger than
supply-leading hypothesis in South Africa.
The econometric methodology is used to augment results of the survey study. Phase III of
the study re-examines econometric relationship between bank lending and business
cycles. The study employs cointegration and vector error correction model (VECM)
techniques in order to test for existence of long-run relationship between the selected
variables. Granger causality test technique is applied to the variables of interest to test for
direction of causation between variables. The study uses quarterly data for the period of
1980:Q1 to 2013:Q4. Business cycles are determined and measured by Gross Domestic
Product at market prices while bank-granted credit is proxied by credit extension to the
private sector. The econometric test results show that there is a significant long-run
relationship between economic growth and bank credit extension. The Granger causality
test provides evidence of unidirectional causal relationship with direction from economic
growth to credit extension for South Africa. The study results indicate that the case for
demand-following hypothesis is stronger than supply-leading hypothesis in South Africa.
Economic growth spurs credit market development in South Africa.
Overall, the results show that there is a stable long-run relationship between macroeconomic
business cycles and real credit growth in South Africa. The results show that
economic growth significantly causes and stimulates bank credit. The study, therefore,
recommends that South Africa needs to give policy priority to promotion and
development of the real sector of the economy to propel and accelerate credit extension.
Economic growth is considered as the significant policy variable to stimulate credit
extension. The findings therefore hold important implications for both theory and policy. / Business Management / D.B.L.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:unisa/oai:uir.unisa.ac.za:10500/19590 |
| Date | 06 1900 |
| Creators | Chakanyuka, Goodman |
| Contributors | Serumaga-Zake, Philip |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis |
| Format | 1 online resource (xii, 230 leaves) : illustrations (some color) |
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