The impact of changes in macroeconomic factors on banks’ lending behaviour

Mayibongwe Sangweni; Oliver Takawira

doi:10.24294/jipd.v8i11.8217

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The impact of changes in macroeconomic factors on banks’ lending behaviour

Mayibongwe Sangweni

Oliver Takawira

Journal of Infrastructure Policy and Development 2024, 8(11), 8217; https://doi.org/10.24294/jipd.v8i11.8217

Submitted：26 Jul 2024

Accepted：03 Sept 2024

Published：16 Oct 2024

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Abstract

Loans are a critical transmission channel for commercial banks as well as an important revenue source. Macroeconomic factors are not within the control of commercial banks, however, select factors are observed to have a direct impact on lending behaviour in studies around the world. This study examined the relationship between macroeconomic variables and the lending behaviour of banks in South Africa for the period ranging from 2001 to 2022. Quarterly time series data was employed using the Autoregressive Distributed Lag Model (ARDL). The empirical results of the paper revealed that there is a long-run relationship between the repurchase rate (repo rate), inflation, the real effective exchange rate (REER) and lending behaviour in South Africa. The REER and inflation were both found to have a positive relationship, whilst the repo rate had a negative relationship. In addition, Gross Domestic Product (GDP), the activity rate and sovereign credit rating (SCR) changes returned insignificant results. Overall, these findings show that select macroeconomic factors do influence lending behaviour in South Africa. Furthermore, the results suggest that monetary policy decisions have a direct influential effect on lending and the South African Reserve Bank (SARB) has implemented their policies effectively.

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References

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