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Do Economic Policy Uncertainty Shocks Impact the Bank Lending Rate Margins?

  • Eliphas Ndou
  • Thabo Mokoena
Chapter

Abstract

Evidence indicates that positive economic policy uncertainty shocks raise bank lending rate margins. By contrast, the negative economic policy uncertainty shock lowers bank lending rate margins. The counterfactual VAR evidence shows that inflation below 6 % dampens the actual rise in the bank lending rate margins following positive economic policy uncertainty shocks. Thus policymakers should consider that, a large reduction in the repo rate than expected is needed to overcome the mitigating effects of elevated economic policy uncertainty in raising the bank lending rate margins even in a low inflation environment.

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Copyright information

© The Author(s) 2019

Authors and Affiliations

  • Eliphas Ndou
    • 1
    • 3
    • 4
  • Thabo Mokoena
    • 2
  1. 1.Economic Research DepartmentSouth African Reserve BankPretoriaSouth Africa
  2. 2.Department of Economic, Small Business Development, Tourism and Environmental AffairsFree State Provincial GovernmentBloemfonteinSouth Africa
  3. 3.School of Economic and Business SciencesUniversity of the WitwatersrandJohannesburgSouth Africa
  4. 4.Wits Plus, Centre for Part-Time StudiesUniversity of the WitwatersrandJohannesburgSouth Africa

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