Author

  • Ferdinand Niyimbanira

    • Vaal University of Technology, South Africa
    • South Africa

  • Rachel Nishimwe-Niyimbanira

    • North West University, South Africa
    • South Africa

  • Sanderson Sabie Kuyeli

    • North West University, South Africa
    • South Africa

  • Koleka Rangaza

    • Vaal University of Technology, South Africa
    • South Africa

Abstract

This study empirically identifies the determinants of interest rate spreads (IRS) in South Africa over the period 1990 to 2012. The study uses the Johansen Cointegration Approach and Vector ErrorCorrection techniques to identify the variables in explaining the interest rate spreads in South Africa. It considers the inflation rate, reserve requirements, Treasury bill, discount rate, money supply (M2) and gross domestic product per capita variables as they explain the movement of interest rate spreads. A significant short-run relationship between IRS and its explanatory variables was observed. These macroeconomic variables are significant in explaining the behavior of the South African IRS in the longrun. This paper has focused on illuminating on how the interest rate spreads are impacted by both exogenous and endogenous variables. If controlled, these variables are most likely to have the largest effects on reducing such spreads. In addition, it suggests that the reduction in the reserve requirements prescribed by the South African Reserve Bank would help to reduce the interest rate spreads. Based on the results of the study, policy implications and suggestion for future research are made.

Keywords

References

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How to Cite

Niyimbanira, F., Nishimwe-Niyimbanira, R., Kuyeli, S. S., & Rangaza, K. (2015). The Determinants of Interest Rate Spreads in South Africa: A Cointegration Approach. Journal of Economics and Behavioral Studies, 7(2(J), 101-108. https://doi.org/10.22610/jebs.v7i2(J).567

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Copyright (c) 2015 Ferdinand Niyimbanira, Rachel Nishimwe-Niyimbanira, Sanderson Sabie Kuyeli, Koleka Rangaza (Author)

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Research Paper

Published in

Vol. 7 No. 2(J) (2015) Banking, Fraud & Behavioural Finance View issue contents

Published

2015-04-30

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