Does an Increase in the Value of Companies’ Cash Holdings Impact the Transmission of Expansionary Monetary Policy Shocks? Counterfactual Policy Analysis

  • Eliphas Ndou
  • Thabo Mokoena


Evidence indicates that expansionary monetary policy shocks raise credit growth more than the counterfactual suggests in the low economic policy uncertainty regime. This suggests that, in the low economic policy uncertainty environment, the slowdown in the companies’ deposits growth due to an expansionary monetary policy shock amplifies the increases in the credit growth. By contrast, an expansionary monetary policy shock raises credit growth less than the counterfactual in the high uncertainty regime. This is due to an increase in the growth of companies’ deposits in the high uncertainty regime, which dampens credit growth. The multiplier mechanism in the credit creation based on deposits is weakened in the high economic policy uncertainty periods and this weakens the stimulatory effects of expansionary monetary policy shocks.


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© 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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