Alternative measures of credit extension for countercyclical buffer decisions in South Africa

Raputsoane, Leroi (2015): Alternative measures of credit extension for countercyclical buffer decisions in South Africa.

Abstract

This paper analyses the behaviour of alternative measures of credit extension for countercyclical buffer decisions in South Africa. The cyclical properties of alternative measures of credit extension are examined over the economic and the financial cycles. The results show that the deviation of the ratio of private sector credit extension to gross domestic product from its long term trend is countercyclical with the economic cycle. The results also show that the deviation of the logarithm of private sector credit extension from its long term trend is procyclical with both the economic and the financial cycle. The annual percent change in private sector credit extension generally performs poorly in cyclical terms with both the economic and the financial cycle. Consequently, of the three alternative measures of private sector credit extension considered, the deviation of the logarithm of private sector credit extension from its long term trend could be used as a common reference guide for implementing the countercyclical capital buffers for financial institutions in South Africa.

• Item Type: MPRA Paper
• Language: English
• Keywords: Credit extension, Countercyclical capital buffers
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E51 - Money Supply ; Credit ; Money Multipliers; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages

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