A Computable General Equilibrium Model for Banking Sector Risk Assessment in South Africa

34 Pages Posted: 6 Aug 2019

See all articles by Conrad Beyers

Conrad Beyers

University of Pretoria

Allan De Freitas

University of Pretoria

Kojo A. Essel-Mensah

University of Pretoria - University of Pretoria

Reyno Seymore

Western Australian Department of Treasury

Dimitrios P. Tsomocos

University of Oxford - Said Business School and St. Edmund Hall

Date Written: July 30, 2019

Abstract

In this article a banking sector Computable General Equilibrium (CGE) model for South Africa is developed. The model is used to estimate the potential effect of regulatory policy on the economy and as a risk assessment tool to assess how changes in regulation affect the economy.

The model provides a methodology for regulators of the banking sector and policy makers in South Africa to deal with risk assessment and future regulatory planning.The importance of risk assessment in the banking sector, especially systemic risk, cannot be over emphasized as failure to adequately assess the risks in the banking sector usually leads to serious financial crises including the collapse of major financial institutions. The CGE model considers interactions amongst various entities of the economy so could detect the risks in the banking sector. Our results suggest that interest rate targeting has more controlled effects than monetary base targeting since pecuniary externalities are reduced.

Keywords: Computable general equilibrium, Banking regulation, Systemic risk

Suggested Citation

Beyers, Conrad and De Freitas, Allan and Essel-Mensah, Kojo A. and Seymore, Reyno and Tsomocos, Dimitrios P., A Computable General Equilibrium Model for Banking Sector Risk Assessment in South Africa (July 30, 2019). Saïd Business School WP 2019-11. Available at SSRN: https://ssrn.com/abstract=3430497 or http://dx.doi.org/10.2139/ssrn.3430497

Conrad Beyers (Contact Author)

University of Pretoria ( email )

Physical Address Economic and Management Sciences
Pretoria, Gauteng 0002
South Africa

Allan De Freitas

University of Pretoria ( email )

Physical Address Economic and Management Sciences
Pretoria, Gauteng 0002
South Africa

Kojo A. Essel-Mensah

University of Pretoria - University of Pretoria ( email )

South Africa

Reyno Seymore

Western Australian Department of Treasury ( email )

Australia

Dimitrios P. Tsomocos

University of Oxford - Said Business School and St. Edmund Hall ( email )

Park End Street
Oxford, OX1 1HP
Great Britain
+44 1865 288 932 (Phone)
+44 1865 288 805 (Fax)

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