Monetary Policy Shocks and Household Indebtedness in South Africa

This study examines the impact of monetary policy shocks on South African household indebtedness between 1990 and 2021. Utilizing annual time-series data from the South African Reserve Bank and FRED through an auto-regressive distributed lag (ARDL) model, the research identifies a significant negative correlation between interest rates and debt levels. The study concluded that an increase in inflation and interest rates has a negative impact on household indebtedness, concluding that it would be beneficial for citizens if the inflation rate decreased, relieving them of the burden of household debt. It is important for policymakers to take into account the potential impact of maintaining a high interest rate and inflation.