The Integration of Mortgage and Capital Markets in Emerging Economies - Evidence from South Africa

Abstract

Integration of the capital and mortgage markets is an important step in moving emerging countries toward full economic development. With data from South Africa, this research examines the incremental contribution of deregulation and the secondary mortgage market to the integration between the mortgage and capital markets. With deregulation occurring in the early 1980s, the results indicate that the two markets were fully integrated prior to 2001 when a secondary mortgage market was introduced in South Africa. However, we also find that the introduction of the secondary mortgage has significantly reduced constraints on the supply of mortgage credit.

Keywords: Integration, Secondary Mortgage Market, Cointegration, Mortgage Market, Capital Market