Financial System and Public Debt in South Africa: A Structural Vector Autoregression Model Application.

This paper looks at how final consumption, inflation, economic growth and government borrowing affect financial system efficiency and credit in South Africa between 1990 and 2021. The analysis relies on Structural Vector Autoregression, Granger causality tests, structural impulse responses and forecast error variance decomposition. The findings show that final consumption, inflation and borrowing exert clear and economically meaningful effects on financial-system dynamics. Each variable leaves a distinct imprint: consumption and borrowing influence credit volumes more strongly, while inflation and borrowing weigh more heavily on efficiency measures. Central-government borrowing itself responds in measurable ways to shifts in the other series. Granger tests confirm directional causality running from these macroeconomic variables toward financial outcomes, and the impulse responses and variance decompositions quantify the relative size of each contribution over different horizons. Inflation emerges as a particularly persistent drag on credit-market conditions, whereas consumption shocks tend to register more quickly in lending activity. These patterns point to practical policy steps: streamline processes that raise efficiency, widen credit access, reduce the distorting weight of government borrowing, and keep inflation from tightening credit conditions. The quantitative detail should be of interest to anyone working on financial-sector performance in developing economies.