Loud and clear? Can we hear when the SARB speaks?

Monique Reid and Stan Du Plessis ()

No 11/2010, Working Papers from Stellenbosch University, Department of Economics

Abstract: Inflation 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.

Keywords: South Africa; Inflation targeting; Central bank communication; Effective monetary policy; forward-looking policy framework (search for similar items in EconPapers)
JEL-codes: E42 E52 E58 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-afr, nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (9)

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Journal Article: LOUD AND CLEAR? CAN WE HEAR WHEN THE SARB SPEAKS? (2010)
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