IDEAS home Printed from https://ideas.repec.org/p/rbz/wpaper/7434.html
   My bibliography  Save this paper

Qualitative Guidance and Predictability of Monetary Policy in South Africa

Author

Listed:
  • Alain Kabundi
  • Ntuthuko Tsokodibane

Abstract

This paper investigates the impact of rising cycle talk on the predictability of the likely future path of the policy rate in South Africa. Throughout 2014 the South African Reserve Bank (SARB) explicitly communicated that monetary policy was on a rising cycle until normalisation is reached. Given that the "rising cycle" talk occurred early in 2014, we compare the forecasts in 2013 to those in 2014. We use two sources of expectations, the survey of economic experts obtained from Thomson Reuters and the Forward Rate Agreements (FRAs) which represent the expectations of the financial market participants. The results based on descriptive analysis and a nonparametric change points model confirm the influence of the "rising cycle" talk in shaping expectations of both economic experts and financial market participants on the future path of the reaction function of the SARB. Besides the surprise effects of January 2014, agents clearly predicted subsequent rate hikes based on the guidance received from the SARB. Previous rising interest rate cycles do not portray the same degree of predictability by analysts.

Suggested Citation

  • Alain Kabundi & Ntuthuko Tsokodibane, 2016. "Qualitative Guidance and Predictability of Monetary Policy in South Africa," Working Papers 7434, South African Reserve Bank.
    • Handle: RePEc:rbz:wpaper:7434
    as

    Download full text from publisher

    File URL: http://www.resbank.co.za/content/dam/sarb/publications/working-papers/2016/7434/WP1609.pdf
    File Function: Revision
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Monique Reid & Pierre Siklos, 2020. "Building Credibility and Influencing Expectations The Evolution of Central Bank Communication," Working Papers 10144, South African Reserve Bank.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rbz:wpaper:7434. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jessica VanWyk (email available below). General contact details of provider: https://edirc.repec.org/data/rbagvza.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.