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Monetary Policy Transparency and Financial Market Forecasts in South Africa

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  • Vivek B. Arora
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    Abstract

    The transparency of monetary policy in South Africa has increased substantially since the end of the 1990s; but little empirical work has been done to examine the economic benefits of the increased transparency. This paper shows that, in recent years, South African private sector forecasters have become better able to forecast interest rates, are less surprised by reserve bank policy announcements, and are less diverse in the cross-sectional variety of their interest rate forecasts. In addition, there is some evidence that the accuracy of inflation forecasts has increased. The improvements in interest rate and inflation forecasts have exceeded those in real output forecasts, suggesting that increases in reserve bank transparency are likely to have played a role.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/123.

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    Length: 25
    Date of creation: 01 May 2007
    Date of revision:
    Handle: RePEc:imf:imfwpa:07/123

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    Related research

    Keywords: Economic forecasting; inflation; monetary policy; inflation forecasts; monetary policy transparency; inflation targeting; monetary transparency; monetary fund; inflation rate; inflation target; foreign exchange; inflation targeting framework; monetary policy framework; real output; inflation rates; actual inflation; inflation dynamics; average inflation rate; macroeconomic stability; average inflation; monetary conditions;

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    1. Frederic S. Mishkin & Adam S. Posen, 1997. "Inflation targeting: lessons from four countries," Economic Policy Review, Federal Reserve Bank of New York, issue Aug, pages 9-110.
    2. Swanson, Eric T., 2006. "Have Increases in Federal Reserve Transparency Improved Private Sector Interest Rate Forecasts?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(3), pages 791-819, April.
    3. M. Nowak & Ketil Hviding & Luca Antonio Ricci, 2004. "Can Higher Reserves Help Reduce Exchange Rate Volatility?," IMF Working Papers 04/189, International Monetary Fund.
    4. William Poole & Robert H & Rasche & Daniel L. Thornton, 2002. "Market anticipations of monetary policy actions," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 65-94.
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    Cited by:
    1. Martin Grandes & Marcel Peter & Nicolas Pinaud, 2010. "Pricing the Currency Premium Under Flexible Exchange Rates: Evidence from South Africa," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(60), pages 7-52, October -.
    2. Francesca Giubilo, 2010. "What Could be the Future of South Africa After National Elections on 22 April 2009?," Transition Studies Review, Springer, vol. 16(4), pages 948-961, February.

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