Do Positive Excess Capital Adequacy Ratio Shocks Influence the Income Inequality Dynamics in South Africa

Abstract

Evidence reveals that a positive excess CAR shock raises income inequality growth. Evidence from counterfactual analysis indicates that the actual decline in credit and GDP growth due to positive excess CAR shock exceeds those of the counterfactual responses. This suggests that increased income inequality growth following the positive excess CAR shocks exacerbates the decline in the real economic activity. From policy perspective, Perugini et. al (2015) suggests that policymakers should cast their nets wider than financial regulatory reforms and consider the effects of their policy changes on influencing the distributive patterns, which include income inequality.