scholarly journals Risk, opportunities and reasons of the household debt changes: The case of an emerging economy

2016 ◽  
Vol 14 (1) ◽  
pp. 476-484
Author(s):  
Sisimogang Tracy Seane ◽  
Gisele Mah ◽  
Paul Saah
Keyword(s):  
South Africa ◽  
Interest Rate ◽  
Price Index ◽  
Consumer Price Index ◽  
Debt Service ◽  
Disposable Income ◽  
Household Debt ◽  
Household Savings ◽  
Income Household ◽  
Household Disposable Income

In the past decades, household debt in both developed and developing countries have been increasing. With an increase in the standard of living, household debt is also bound to increase. This paper examines the cointegration and causal link among household disposable income, household savings, and debt service ratio, lending interest rate, consumer price index and household debt in South Africa. An Autoregressive Distributed Lag and Granger causality techniques was used to analyse data collected from the South African Reserve Bank and Quantec from 1984 to 2014. The results of Autoregressive Distributed Lag test revealed cointegrating relationships between household debt and debt service ratio as well as household debt and lending interest rate. However, there is no long run cointegrating relationship between household disposable income, household savings and consumer price index with household debt. The Granger causality results revealed that household disposable income, household savings, debt service ratio, lending interest rate, consumer price index do Granger cause household debt in South Africa. Policy makers should thus target these variables in order to reduce household debt in South Africa.

scholarly journals Risk, opportunities and reasons of the household debt changes: The case of an emerging economy

2016 ◽  
Vol 6 (4) ◽  
pp. 207-215
Author(s):  
Sisimogang Tracy Seane ◽  
Gisele Mah ◽  
Paul Saah
Keyword(s):  
South Africa ◽  
Interest Rate ◽  
Price Index ◽  
Consumer Price Index ◽  
Debt Service ◽  
Disposable Income ◽  
Household Debt ◽  
Household Savings ◽  
Income Household ◽  
Household Disposable Income

In the past decades, household debt in both developed and developing countries have been increasing. With an increase in the standard of living, household debt is also bound to increase. This paper examines the cointergation and causal link among household disposable income, household savings, debt service ratio, lending interest rate, consumer price index and household debt in South Africa. An Autoregressive Distributed Lag and Granger causality techniques was used to analyse data collected from the South African Reserve Bank and Quantec from 1984 to 2014. The results of Autoregressive Distributed Lag test revealed cointegrating relationships between household debt and debt service ratio as well as household debt and lending interest rate. However, there is no long run cointegrating relationship between household disposable income, household savings and consumer price index with household debt. The Granger causality results revealed that household disposable income, household savings, debt service ratio, lending interest rate, consumer price index do Granger cause household debt in South Africa. Policy makers should thus target these variables in order to reduce household debt in South Africa.

scholarly journals Determinants of household over-indebtedness in South Africa

2021 ◽  
Vol 09 (02) ◽  
Author(s):  
Roseline Tapuwa Karambakuwa ◽  
◽  
Ronney Ncwadi ◽  
Keyword(s):  
South Africa ◽  
Interest Rates ◽  
Disposable Income ◽  
Household Debt ◽  
Management Skills ◽  
Finance Management ◽  
Household Disposable Income ◽  
Negative Impacts ◽  
Social Grant ◽  
Female Headed Households

The proportion of household debt to disposable income is high in South Africa, signifying over-indebtedness which reduces the welfare of households. High debt leads to low savings, negatively impacting economic growth. This paper presents the determinants of household debt distress in South Africa and comes up with recommendations on how to manage household debt. The objectives are achieved through systematic literature review. Findings suggest that households are over-indebted because of several reasons. They lack necessary finance management skills and proper protection from predatory practices by lenders. Household indebtedness is also caused by the rising cost of living which leads to low household disposable income and savings, high interest rates, misfortunes and adverse trigger events and income inequalities. Education, age and being a recipient of a social grant all have positive and negative impacts on household indebtedness. Findings also suggest that female-headed households, renting households, large households, urban based households, households with a mortgage and households where the head is not working, is sick or disabled are more likely to be over-indebted. A framework is presented with recommendations on how household debt can be effectively managed in South Africa. Upskilling in finance management can help improve the way households manage their finances. Moneylending institutions should avoid predatory lending and disclose vital information affecting household borrowing decisions. A downward review of interest rates on debt is necessary with a balance between profitability and sustainability of loan repayments. Consumption insurance on loans is recommended to cushion debt distressed households.

scholarly journals Developing a framework for managing household debt The case of South Africa

2021 ◽  
Vol 12 (01) ◽  
Author(s):  
Roseline Tapuwa Karambakuwa ◽  
◽  
Ronney Ncwadi ◽  
Keyword(s):  
South Africa ◽  
Interest Rates ◽  
Urban Areas ◽  
Secondary Data ◽  
Disposable Income ◽  
Household Debt ◽  
Finance Management ◽  
Household Disposable Income ◽  
Social Grant ◽  
Female Headed Households

The proportion of household debt to disposable income is very high in South Africa, signifying over-indebtedness which reduces the welfare of households and ultimately reduces economic growth. This paper presents the determinants of the household debt in South Africa and comes up with a framework of recommendations on how to manage household debt. The objectives are achieved through systematic literature review, document analysis and secondary data analysis. Our findings suggest that households are over-indebted because they lack the necessary finance management skills, lack proper protection from the predatory practices by lenders and fail to obtain disclosure of vital information pertaining credit which affects their decision to borrow. Household indebtedness is also caused by the rising cost of living and low household disposable income, low household savings, high interest rates, misfortunes or adverse trigger events and living in urban areas. Education, age and being a recipient of a social grant all have positive and negative impacts on household indebtedness. Findings also suggest that female-headed households, renting households, large households, households with a mortgage and households where head is not working, is sick or disabled are more likely to be over-indebted. We develop a framework with recommendations for managing household debt in South Africa. We recommend upskilling to help households to effectively manage their finances and take responsibility. Moneylending institutions are encouraged to disclose vital information pertaining credit which affects decision to borrow by households and to avoid predatory lending. We also recommend a review of interest rates on debt and availability of consumption insurance on all loans to cover for cases when the household faces unforeseen circumstances affecting repayment.

scholarly journals THE LONG-RUN RELATIONSHIP BETWEEN HOUSE PRICES AND INFLATION IN SOUTH AFRICA: AN ARDL APPROACH

2013 ◽  
Vol 17 (2) ◽  
pp. 188-198 ◽  
Author(s):  
Roula Inglesi-Lotz ◽  
Rangan Gupta
Keyword(s):  
South Africa ◽  
Price Index ◽  
House Prices ◽  
Housing Prices ◽  
Consumer Price Index ◽  
Data Series ◽  
Middle Segment ◽  
Goods And Services ◽  
Long Run ◽  
Housing Costs

This paper investigates whether house prices provide a suitable hedge against inflation in South Africa by analysing the long-run relationship between house prices and the prices of non-housing goods and services. Quarterly data series are collected for the luxury, large middle-segment, medium middle-segment, small middle-segment and the entire middle segment of house prices, as well as, the consumer price index excluding housing costs for the period 1970:Q1–2011:Q1. Based on autoregressive distributed lag (ARDL) models, the empirical results indicate long-run cointegration between the house prices of all the segments and the consumer price index excluding housing costs. Moreover, the long-run elasticity of house prices with respect to prices of non-housing goods and services, i.e., the Fisher coefficient is greater than one for the luxury segment, virtually equal to one for the small middle-segment, and less than one for the large and medium middle-segments, as well as the affordable segments. More importantly though, the estimated Fisher coefficients are not statistically different from unity – a result consistent with the proposed theoretical framework relating housing prices and consumer prices excluding housing expenditure. In general, we infer that house prices in South Africa provide a stable inflation hedge in the long-run.

scholarly journals An Empirical Analysis Of The Interest Rate-Vehicle Purchase Decision Nexus In South Africa

2013 ◽  
Vol 12 (5) ◽  
pp. 477
Author(s):  
Joseph Chisasa ◽  
Winnie Dlamini
Keyword(s):  
South Africa ◽  
Interest Rate ◽  
Interest Rates ◽  
Household Income ◽  
Price Index ◽  
Series Data ◽  
Passenger Vehicle ◽  
Producer Price ◽  
Producer Price Index ◽  
Vehicle Purchase

The domestic passenger car market has witnessed substantial growth in South Africa. At the same time, bank repossessions and black-listing of defaulting borrowers have increased in sympathy. This paper empirically examines the link between interest rates and the borrowers decision to purchase a passenger vehicle in South Africa. We use monthly time series data of passenger vehicles purchased, household income, fuel prices, prime interest rates and producer price index for manufacturers from January 1995 to December 2011. With passenger vehicle unit purchases as the dependent variable, we obtain OLS estimates of the passenger vehicle purchase function. Results show that there is a negative, but insignificant, relationship between interest rates and passenger vehicle purchases in South Africa. Holding other factors constant, a 1% increase in interest rate results in a 0.9% decrease in passenger vehicle purchases. Household income, fuel price and producer price index are observed to have a positive and insignificant impact on the decision to purchase a passenger vehicle. Our results have policy and decision making implications to lenders and borrowers, respectively.

Analysis of Relationships and Causality between Consumer Price Index (CPI), the Producer Price Index (PPI) and Purchasing Manager’s Index (PMI) in South Africa

2018 ◽  
Vol 10 (6) ◽  
pp. 25 ◽  
Author(s):  
Daniel Francois Meyer ◽  
Thomas Habanabakize
Keyword(s):  
South Africa ◽  
Price Index ◽  
Econometric Model ◽  
Consumer Price Index ◽  
Economic Research ◽  
Producer Price ◽  
Correction Model ◽  
Producer Price Index ◽  
Long Run ◽  
Short Run

The variables the consumer price index (CPI), the producer price index (PPI) and the purchasing managers’ index (PMI) and play major roles in economic forecasting. The overall objective of this study is to assess the inter-relationships between CPI, PPI and PMI as predicting variables. This study is quantitative in nature and employed an ARDL econometric model, error correction model (ECM) and Granger causality approaches to establish long and short-run relationships. The ARDL method was used due to the fact that the variables had a mix of stationarity at levels I (0) and the first difference I (1). Quarterly datasets were obtained from Statistics South Africa (Stats SA) and the Bureau of Economic Research (BER) for the period 2000 to 2017. Results from the estimations discovered that variables cointegrate in the long-run. Additionally, evidence of short-run relationships has been determined using ECM. Furthermore, causal relationships were also analysed with results indicating that CPI causes PMI and PPI causes PMI. The implication of the research is the confirmation of the importance of relationships between CPI, PPI and PMI, which is especially significant in the short-run and the three index indicators are important macro-economic indicators for changes in overall economic activity on a macro level.

scholarly journals ANALISIS INFLASI DI SUMATERA UTARA: SUATU MODEL ERROR CORRECTION (ECM)

2020 ◽  
Vol 1 (2) ◽  
Author(s):  
Hafsyah Aprillia
Keyword(s):  
Interest Rate ◽  
Price Index ◽  
Inflation Rate ◽  
Consumer Price Index ◽  
Model Error ◽  
Explanatory Variables ◽  
Interest Rate Spread ◽  
Optimal Value ◽  
Model Equations ◽  
The U.S

The research was conducted to determine the effect of economic variables that can explain the change or variation in the rate of inflation in the Consumer Price Index (CPI) as the dependent variable. The explanatory variables (independent) were used as controls are SBI, the nominal interest rate spread (SBI) and the value of the rupiah against the U.S. dollar. Based on these results, according to the specific purpose of the model equations II, suggested economic actors can use SBI interest rate spread as an indicator of variations in the CPI inflation rate at intervals of 8 and 12 months, with a note that the obtained level of explanation has not shown that the optimal value.

scholarly journals Effectiveness of the national credit act of South Africa in reducing household debt: a Johansen cointegration and VECM analysis

2014 ◽  
Vol 3 (4) ◽  
pp. 179-192
Author(s):  
Alfred Bimha
Keyword(s):  
South Africa ◽  
Convincing Evidence ◽  
Cointegration Analysis ◽  
Disposable Income ◽  
Household Debt ◽  
Coverage Ratio ◽  
Long Run ◽  
Johansen Cointegration ◽  
Short Run ◽  
National Credit Act

The rise in unsecured lending has cast doubt on the effectiveness of the National Credit Act in South Africa. Reckless lending was seen rising since 2006 and plateauing in 2009. Could this be evidence of the effectiveness of the National Credit Act (NCA) curbing reckless lending household debts? This study embarks on finding whether reckless lending was present in the Pre-NCA period running from 1994 to the end of 2nd quarter of 2007 when the NCA was enacted. Further in this study, the effectiveness of NCA in curbing reckless lending in the Post-NCA period starting from the 3rd quarter of 2007 to the 2nd quarter of 2014. Using the Johansen Cointegration analysis and Vector Error Correction Model, long run and short run Granger causality tests are done with the household debt as a dependent and debt service coverage ratio, household debt to disposable income ratio and disposable income as independents. The results from the tests done provide convincing evidence that reckless lending indeed was present in the Pre-NCA period and there is evidence showing the curbing of reckless lending in the Post-NCA period.

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