Loud and clear? Can we hear when the SARB speaks?
AbstractInflation targeting is a forward-looking framework for monetary policy that has brought unprecedented transparency to the process of monetary policy. This paper aims to assess the degree to which the South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) has, since the introduction of inflation targeting, successfully communicated to the public its policy analysis, and, in particular, the expected future policy changes. This paper follows international literature (Rosa and Verga (2007), Ehrmann and Fratszcher (2005)) in constructing a numerical index that is used to reflect the information content of the SARB’s communications, specifically the monetary policy statements that accompanied each of the MPC meetings since 2000. Relating this index to subsequent policy decisions reveals the informativeness of the index and, by implication, the informativeness of the underlying monetary policy statements. This method allows us to judge, systematically, the degree to which the MPC has communicated successfully, and the evolution of that success over the past nine years. We find evidence that the MPC has succeeded in signalling their likely future policy decision with consistency over this period.
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Bibliographic InfoPaper provided by Stellenbosch University, Department of Economics in its series Working Papers with number 11/2010.
Date of creation: 2010
Date of revision:
South Africa; Inflation targeting; Central bank communication; Effective monetary policy; forward-looking policy framework;
Other versions of this item:
- Monique Reid & Stan Du plessis, 2010. "Loud And Clear? Can We Hear When The Sarb Speaks?," South African Journal of Economics, Economic Society of South Africa, Economic Society of South Africa, vol. 78(3), pages 269-286, 09.
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
This paper has been announced in the following NEP Reports:
- NEP-AFR-2010-06-04 (Africa)
- NEP-ALL-2010-06-04 (All new papers)
- NEP-CBA-2010-06-04 (Central Banking)
- NEP-MAC-2010-06-04 (Macroeconomics)
- NEP-MON-2010-06-04 (Monetary Economics)
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- Monique Reid & Stan Du Plessis, 2011. "Talking to the inattentive public: How the media translates the Reserve Bankâ€™s communications," Working Papers 254, Economic Research Southern Africa.
- Monique Reid & Stan du Plessis, 2011. "Talking to the inattentive Public: How the media translates the Reserve Bank’s communications," Working Papers 19/2011, Stellenbosch University, Department of Economics.
- Tatiana Lysenko & Geoff Barnard, 2011. "Strengthening the Macroeconomic Policy Framework in South Africa," OECD Economics Department Working Papers 847, OECD Publishing.
- Kasai, Ndahiriwe & Naraidoo, Ruthira, 2011. "Evaluating the forecasting performance of linear and nonlinear monetary policy rules for South Africa," MPRA Paper 40699, University Library of Munich, Germany.
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