Do Positive Bank Concentration Shocks Impact Employment in South Africa?
Evidence reveals that employment declines significantly to positive bank concentration shocks and the declines are much bigger to persistently rising shocks than to less persistent shocks. In addition, the counterfactual analysis reveals that the actual employment declines more than the counterfactual suggests. This indicates that the declining credit extension and reduced capital formation amplifies the reduction in employment. Policymakers should reduce the degree of the banking concentration and make the banking system competitive by lowering the entry barriers and by introducing a sliding scale of capital adequacy ratios that rise with the size of the banks.