Household Sector’s Financial Sustainability in South Africa

Abstract

The aim of this study was to examine the financial behaviour of the South African’s household sector in respect of how households reacted to their aggregate debt position during the sample period 1990-2013. Following diagnostic evaluation of unit root and cointegration properties of the data series, a financial reaction function was estimated to analyse whether the households sector’s financial behaviour was sustainable during the period under review. A typical four-variable framework of the Vector Error Correction Model (VECM) was estimated in E-views. In conformity to the lifecycle model, the results provide evidence that households actually historically behaved in a financially sustainable manner over the period 1990-2013.

Keywords: household, debt, saving, behaviour, sustainability, disposable income, net wealth