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2017 | OriginalPaper | Chapter

19. The National Credit Act, Monetary Policy and Credit Growth

Authors : Nombulelo Gumata, Eliphas Ndou

Published in: Bank Credit Extension and Real Economic Activity in South Africa

Publisher: Springer International Publishing

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Abstract

Analyze how the National Credit Act (NCA) propagates the effects of monetary policy on credit and output
Determine the interaction and effectiveness of monetary policy and the NCA as part of the macro-prudential toolkit
Determine whether there is an economic case for these tools to be coordinated
Establish the degree to which the NCA and the repo rate reinforce each other

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previous chapter Credit Loss Provisions as a Macro-prudential Tool

next chapter Loan-to-Value Ratios, Contractionary Monetary Policy and Inflation Expectations

For further information and details on the Financial Sector Charter that predates the implementation of the NCA and on the NCA see http://www.banking.org.za/index.php/consumer-centre/national-credit-act and http://www.banking.org.za/index.php/consumer-centre/financial-sector-charter-code/

For example, a 50 basis point change in the repo rate.

A Cholesky decomposition is used. In addition, the results were also evaluated using an alternative ordering of variables. We place the repo rate before the NCA, suggesting the repo rate has contemporaneous impact on the NCA, and not vice versa, and we found the results to be robust. The Generalised Impulse Responses Function (GIRF) is used and the results are also robust.

A cumulative dummy as a dummy for number of months since the implementation of the NCA is used, see Tovar et al. (2012).

The standard errors for the confidence intervals are calculated using Monte Carlo simulations.

Similarly to various other studies, we approximate economic activity by using manufacturing production or industrial production.

Blanchard, O., Dell’Ariccia, G., & Mauro, P. (2010). Rethinking macroeconomic policy (IMF Staff Position Note. SPN/10/03).

Ciccarelli, M., Maddaloni, A., & Peydró, J. L. (2013). Heterogeneous transmission mechanism monetary policy and financial fragility in the euro area (Working paper serie No. 1527). https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1527.pdf?4eb9afef475d004df15d7a8ec3535db3

Ciccarelli, M., Maddaloni, A., & Peydró, J. L. (2010). Trusting the bankers: A new look at the credit channel of monetary policy, mimeo (ECB working paper No. 1228). http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1228.pdf

IMF. (2013). The interaction of monetary and macroprudential policies. IMF.

Tovar, C. E., Garcia-Escribano, M., & Vera Martin, M. (2012). Credit growth and the effectiveness of reserve requirements and other macroprudential instruments in Latin America (IMF WP/12/142). Washington, DC: International Monetary Fund.

Title: The National Credit Act, Monetary Policy and Credit Growth
Authors: Nombulelo Gumata
Eliphas Ndou
Publisher: Springer International Publishing
Book: Bank Credit Extension and Real Economic Activity in South Africa
Print ISBN: 978-3-319-43550-3

Electronic ISBN: 978-3-319-43551-0

Copyright Year: 2017
DOI: https://doi.org/10.1007/978-3-319-43551-0_19