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Impact of Inflation and Exchange Rate on the Financial Performance of Commercial Banks in South Africa

Author

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  • Moyo, Delani
  • Tursoy, Turgut

Abstract

The study examines the impact of inflation and exchange rate on the financial performance of commercial banks in South Africa. The study covers four largest commercial banks in South Africa, namely; Standard bank, Nedbank, Capitec bank and Firstrand bank for the period 2003-2019. To measure the financial performance return on equity was used as the dependent variable and inflation and exchange rate as the independent variables. To achieve the objective of the study, the ARDL, FMOLS and DOLS models are used. The findings illustrated that there is a significant inverse relationship between inflation and the return on equity and there is a weak relationship between exchange rate and the return on equity.

Suggested Citation

  • Moyo, Delani & Tursoy, Turgut, 2020. "Impact of Inflation and Exchange Rate on the Financial Performance of Commercial Banks in South Africa," MPRA Paper 101383, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:101383
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    File URL: https://mpra.ub.uni-muenchen.de/101383/1/MPRA_paper_101383.pdf
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    References listed on IDEAS

    as
    1. Sheunesu Zhou & D. D. Tewari, 2019. "Shadow financial services and firm performance in South Africa," Cogent Economics & Finance, Taylor & Francis Journals, vol. 7(1), pages 1603654-160, January.
    2. Huybens, Elisabeth & Smith, Bruce D., 1999. "Inflation, financial markets and long-run real activity," Journal of Monetary Economics, Elsevier, vol. 43(2), pages 283-315, April.
    3. OWOEYE, Taiwo & OGUNMAKIN, Adeduro Adesola, 2013. "Exchange Rate Volatility and Bank Performance in Nigeria," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(2), pages 178-185, February.
    4. Bruno, Michael & Easterly, William, 1998. "Inflation crises and long-run growth," Journal of Monetary Economics, Elsevier, vol. 41(1), pages 3-26, February.
    5. Musyoki, Danson & Pokhariyal, Ganesh P. & Pundo, Moses, 2012. "The impact of real exchange rate volatility on economic growth: Kenyan evidence," Business and Economic Horizons (BEH), Prague Development Center (PRADEC), vol. 7(1), pages 1-17, June.
    6. Danson Musyoki & Ganesh P. Pokhariyal, 2012. "The impact of real exchange rate volatility on economic growth: Kenyan evidence," Business and Economic Horizons (BEH), Prague Development Center, vol. 7(1), pages 59-75, June.
    7. Ayobami, Ojeyinka Titus, 2019. "Exchange Rate Volatility and the Performance of Manufacturing Sector in Nigeria (1981 – 2016)," African Journal of Economic Review, African Journal of Economic Review, vol. 7(2), August.
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    Cited by:

    1. Kofi Opoku-Asante & Collins Owusu Kwaning & Peter Arhenful & Jones Ntiamoah & Gretel Asigbe-Tsriku, 2023. "The Relationship between Bank Deposits and Macroeconomic Variables in Ghana: A Co-Integration Approach," Journal of Economics and Behavioral Studies, AMH International, vol. 15(1), pages 35-44.

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    More about this item

    Keywords

    Financial Performance; Return on Equity; Inflation; Exchange Rate; Commercial Banks; South Africa.;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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