News & events


The impact of monetary policy on household consumption in South Africa

19 August 2014
12:30 - 13:30

Evidence from Vector Autoregressive Techniques

Presenter: Dr Emmanuel Owusu-Sekyere, Economic Performance and Development (EPD), HSRC
Date:  Tuesday, 19 August    
Time: 12:30  – 13:30
Venue: VCRs, Pretoria, Cape Town, Durban

This is a study on how monetary policy affects household consumption in South Africa. Household consumption in South Africa is largely driven by credit/debt due to easy access to credit. This is evidenced by the high level of household debt to disposal income ratio of 76% in South Africa.

This makes households highly vulnerable to changes in monetary policy in South Africa through its impact on the cost of credit. In light of the recent increase in the repo rate by the Monetary Policy Committee, what is likely to be the impact on household credit and consequently household consumption in South Africa? Quarterly data from 1994Q1 to2012Q4 is used to investigate this likely effect.

The results show that household credit will decline sharply one quarter after the increase in the repo rate, whiles household consumption would start declining three quarters after the monetary policy change, also in response to the decline in household credit. Thus changes in monetary policy affect household credit and ultimately household consumption in South Africa.

The seminar may be attended in Pretoria, Cape Town and Durban

RSVP by 18 August

Cape Town: Ray Adams (021) 466 7936,  12th Floor, Plein Park Building, Plein Street, Cape Town
Durban: Ridhwaan Khan (031) 242 5400,   1st Floor, 750 Francois Road, Ntuthuko Junction, Pods 5 and 6, Cato Manor
Pretoria: Arlene Grossberg (012) 302 2811,  1st  Floor, HSRC Building, 134 Pretorius Street, Pretoria