Introduction

Abstract

The United States mortgages subprime crisis is acknowledged as the start of what became the global financial crisis in 2007. This period was followed by global recession and the Euro Area sovereign debt crisis. South Africa went into a brief but sharp recession in 2009. The subsequent period was characterized by elevated economic uncertainties and fragile recovery. In response to the financial crisis, central banks in advanced economies lowered policy rates to almost zero percent and embarked on various unconventional monetary policy interventions, injecting liquidity in global financial markets. The central assumption underlying this approach by central banks was not solely to normalize the functioning of interbank markets but to improve global output and demand conditions. The transmission of quantitive easing (QE) was supposed to stimulate economic growth, investment and expenditure, primarily by encouraging risk-taking by firms and households via the so called “real risk-taking.”