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Prof Guangling Liu delivers his inaugural lecture
Author: Ronél Beukes
Published: 16/08/2019

​Prof Guangling Liu, professor in the Department of Economics, delivered his inaugural lecture with the title Macro-prudential policy and financial stability: Generic versus sector-specific rules, on 13 August 2019.

Prof Liu, who teaches macroeconomics, time series econometrics and mathematical economics at postgraduate level, has a broad interest in macroeconomics, macro-finance, international finance and monetary economics. He currently holds a research fellow position at the South African Reserve Bank, and is also the editor of the working papers of Economic Research Southern Africa.

He has summarised his lecture as follows:

This lecture considers the implications of macro-prudential policy in a setting where different types of borrowers from distinct sectors of the credit market co-exist.

To identify the optimal policy design, we consider two macro-prudential policy regimes, namely generic and sector-specific counter-cyclical loan-to-value (CcLTV), and compare their effectiveness in enhancing financial and macroeconomic stability. The results show that both regimes are effective in this regard, especially when the economy is hit by financial and housing demand shocks. The effectiveness of both regimes is, however, shock-dependent.

To enhance the effectiveness of CcLTV regulation, we argue that the regulator should consider borrowers' heterogeneity and the origin of the shocks, and tailor the CcLTV regulation according to the specific conditions of each sector of the credit market, rather than to the aggregate conditions. In this way, the regulator can directly target the specific sector or borrower type.

  • To watch a video of the inaugural lecture, click here.
  • Photo by Anton Jordaan: F.l.t.r. are Prof Ingrid Woolard, Dean of the Faculty of Economic and Management Sciences; Prof Guangling Liu; and Prof Prof Wim de Villiers, Rector and Vice-Chancellor of Stellenbosch University.