scholarly journals Sentimental Outlook for the Monetary Policies of South African Reserve Bank

2021 ◽  
Vol 10 (3) ◽  
pp. 37-56
Author(s):  
Arnold Segawa
Keyword(s):  
Central Bank ◽  
South African ◽  
Inflation Targeting ◽  
Causal Effect ◽  
Effective Communication ◽  
Inflation Expectations ◽  
Systematic Analysis ◽  
Central Bank Communication ◽  
Inflation Expectation ◽  
Reserve Bank

The South African Reserve Bank (SARB) migrated to inflation targeting in 2000 and has since embarked on a trajectory of transparency. This has taken the shape of releasing Monetary Policy Committee (MPC) statements other forms of communication. This paper examines SARB’s MPC statements’ tone and sentiment between 2000 and 2021 using the Besigye-Segawa’s TextBlob polarity and subjectivity calculator which measures central bank communication tone and sentiment using the Loughran-McDonald dictionary’s word classification to gauge polarity and subjectivity. The study goes on to explore causality of SARB’s MPC statements’ tone and sentiment on inflation expectation results from the Bureau of Economic (BER) results survey. The systematic analysis shows a causality of SARB’s MPC statements’ tone and sentiment on succeeding BER’s inflation expectations results therein justifying the need for effective communication as SARB’s MPC communications’ polarity and subjectivity ultimately have a causal effect on inflation expectations. therein justifying the need for effective communication. As central bank tone and sentiment studies are only emerging in many emerging and frontier markets, this study lays a foundation for future exploration of effects of central bank communication on the expectations channel.

scholarly journals Complementing South African inflation surveys: A suitable forecasting tool

2018 ◽  
Vol 11 (1) ◽  
Author(s):  
Chris Van Heerden ◽  
Andre Heymans ◽  
Yudhvir Seetharam
Keyword(s):  
South African ◽  
General Public ◽  
Inflation Targeting ◽  
Moving Average ◽  
Economic Research ◽  
Inflation Expectations ◽  
Inflation Expectation ◽  
Reserve Bank ◽  
Complex Approach ◽  
Network Process

Central banks currently perform inflation expectation surveys in order to better align their inflation expectations with that of the general public. However, surveys are time-consuming, complicated, expensive and not always accurate, thus compromising the credibility of these expectations. The complexity of inflation targeting and the difficulty of forecasting in real time can also cause policymakers to consider more basic models, which can lead to inexact forecasts. This article employs less complicated models, such as the seasonally adjusted autoregressive integrated moving average and Holt-Winters exponential smoothing models, to provide equally reliable forecasts. A more complex approach in the form of a non-linear autoregressive neural network process was also employed to model the strategic and rational manner in which the general public formulates their expectations. Overall, the forecast estimates provided by these models were superior when compared with the inflation expectations provided by the International Monetary Fund, South African Reserve Bank and Bureau for Economic Research.

Central bank’s perception on inflation and inflation expectations of experts

2015 ◽  
Vol 42 (6) ◽  
pp. 1142-1158 ◽  
Author(s):  
Gabriel Caldas Montes ◽  
Rodolfo Tomás da Fonseca Nicolay
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Inflation Targeting ◽  
Generalized Method Of Moments ◽  
Ordinary Least Squares ◽  
Response Analysis ◽  
Inflation Expectations ◽  
Content Type ◽  
Vector Autoregressive ◽  
Central Bank Communication

Purpose – Due to the fact that studies on central bank communication in emerging countries are still scarce and there are few studies related to the influence that central bank’s perspectives about the state of the economy have on inflation expectations in emerging economies, the purpose of this paper is to contribute to the literature in the following aspects: it proposes an indicator of the central bank’s perception of inflation based on the minutes of the COPOM meetings, and, it analyzes the influence of central bank communication on expert inflation expectations through such indicator. Design/methodology/approach – Due to the fact that the perception of the Central Bank of Brazil is not directly observable, it is measured through the fuzzy set theory by an indicator that captures the informational content of the minutes of the COPOM meetings. The empirical analysis uses ordinary least squares, the generalized method of moments and vector-autoregressive through impulse-response analysis. Findings – The findings suggest that the expectations of financial market experts react according to the content of the information provided by the central bank, i.e., announcements cause deterioration of expectations in times of instability, and reduce inflation expectations when inflation is controlled. The results also support the idea that the credibility of inflation targeting plays a key role in determining inflation expectations. Practical implications – This paper suggests a new approach on studies about central bank communication. The focus here is not on the effect of the announcements in terms of future monetary policy, but on the perception of the central bank in terms of inflation. This central bank’s perception reflects the optimistic or pessimistic view about the economic outlook and risk of inflation and this perception is considered by experts of financial markets. Originality/value – For Brazil, there are no studies about the influence of communication through the minutes of the Brazilian Monetary Policy Committee meetings on inflation expectations. The authors develop an indicator in order to measure central bank’s perception of inflation based on the minutes of COPOM meetings.

scholarly journals Inflation perceptions and inflation expectation in South Africa: trends, determinants and comparisons (2006–2010)

2019 ◽  
Vol 19 (1) ◽  
pp. 1-21
Author(s):  
A Bosch ◽  
J Rossouw ◽  
V Padayachee
Keyword(s):  
South Africa ◽  
South African ◽  
Inflation Expectations ◽  
Data Sets ◽  
Inflation Expectation ◽  
The Third ◽  
Reserve Bank ◽  
Survey Results ◽  
Inflation Perceptions ◽  
Domestic Inflation

This paper reports the results of a multinomial analysis of inflation perceptions and inflation expectations in South Africa. Inflation perceptions surveys among South African individuals have been undertaken since 2006. The introduction of these surveys followed on domestic inflation expectation surveys conducted in 2000, and the use of inflation perceptions surveys internationally. Domestic inflation perceptions surveys among individuals are a private initiative undertaken biennially, while domestic inflation expectation surveys among individuals are funded by the South African Reserve Bank and are undertaken quarterly. By comparing the results of domestic inflation perceptions surveys and inflation expectation surveys undertaken since 2006, this paper establishes common characteristics that impact on the formulation of inflation perceptions and inflation expectations. It supplements earlier research that focused only on the results of the 2006 and 2008 perceptions survey results. With the completion of the third biennial inflation perceptions survey in 2010, more data sets are available for the purposes of comparison. Furthermore, the questions on inflation perceptions were expanded in the third survey. Although this provides for a broader basis of analysis between inflation perceptions surveys and inflation expectation surveys, further periodic inflation perceptions survey data will be required to test whether current inflation figures determine and anchor inflation expectations.

scholarly journals Central Bank Communication and Policy Interest Rate

2020 ◽  
Vol 12 (1) ◽  
pp. 76
Author(s):  
Haryo Kuncoro
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Inflation Targeting ◽  
Central Bank Communication ◽  
Inflation Expectation ◽  
Expectation Gap ◽  
The Impact ◽  
Policy Interest

Central bank communications play an important role in the monetary policy. In the inflation-targeting frameworks, central bank communications might guide public to shape inflation expectations and then determine actual inflation rates through which the policy interest rates policy would manage them. This paper studied the impact and central bank monetary policy communications on the policy interest rate. Unlike other studies, this paper uses two stages. First, we estimate the impact of central bank communication on the inflation expectation gap. Second, we use the estimated value of inflation expectation gap to predict the policy interest rate. The study found evidence that economic agents analyse the Governor Board of Central Bank of Indonesia meeting decisions every month to shape their inflation expectation. Therefore, the difference between inflation expectation and actual inflation tends to narrow. The inflation expectation gap affects the policy interest rates in Indonesia. In other words, the policy interest rates can control the inflation rate and anchor expectations as required by the inflation-targeting framework.

scholarly journals Does Monetary Policy Credibility Help in Anchoring Inflation Expectations? Evidence from Six Inflation Targeting Emerging Economies

2021 ◽  
Vol 10 (1) ◽  
pp. 93-111
Author(s):  
Aslı Güler
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Emerging Economies ◽  
Inflation Targeting ◽  
Emerging Market ◽  
Inflation Expectations ◽  
Inflation Target ◽  
The Public ◽  
Inflation Expectation ◽  
Using Data

Abstract Most emerging market central banks have adopted inflation targeting as their monetary policy system. The heart of inflation targeting system is inflation expectations. The success of a central bank in achieving targets depends on to the extent to which inflation expectations are formed by the announced targets. As the credibility of the central bank increases, its ability to affect the public expectation also increases. The public adjusts its inflation expectations based on announced inflation target only in case of that they believe that the central bank has the sufficiency to reach the inflation target. Credibility enables expectation to be formed in a forward-looking way by weakening its connection with the past. This study aims to contribute to the literature concerning the effects of credibility on monetary policy. For this purpose, using data of six emerging inflation targeting economies (Turkey, Brazil, the Czech Republic, Chile, Poland, and South Africa), the empirical tests were carried out in order to understand the effect of the credibility on the behaviour of inflation expectation in emerging economies. The findings denote that credibility is quite relevant to reduce inflation expectations and contributes to the strength of inflation targets being an anchor for inflation expectations.

Monetary Policy Committees and Central Bank Communication

2020 ◽  
pp. 19-44
Author(s):  
Nicole Baerg
Keyword(s):  
Central Bank ◽  
Size Composition ◽  
Central Banks ◽  
Empirical Literature ◽  
Inflation Expectations ◽  
Policy Changes ◽  
Central Bank Communication ◽  
Central Bank Transparency ◽  
Key Policy

This chapter starts by tracing trends in central bank transparency. It reports key policy changes by some of the world’s most important central banks: the FOMC, the European Central Bank, the Bank of England, and the Bank of Japan. The second section reviews the theoretical and empirical literature on central bank design, paying close attention to the role of committee size, composition, and decision-making protocol, and classifies central banks around the world according to these features. The third section outlines the aim of central bank communications: to broadcast news and to reduce noise. The author argues that while previous literature has examined both committee design and central bank communications, it has done so in isolation. By putting these two topics together, the chapter argues that we can better understand, first, how different types of committees may be better at communicating and, second, how communication affects households’ inflation expectations and inflation.

scholarly journals Qualitative and quantitative central bank communication and inflation expectations

2016 ◽  
Vol 17 (1) ◽  
Author(s):  
Paul Hubert
Keyword(s):  
Principal Component Analysis ◽  
Central Bank ◽  
Instrumental Variables ◽  
Principal Component ◽  
Inflation Expectations ◽  
Governing Council ◽  
Qualitative And Quantitative ◽  
Central Bank Communication ◽  
Instrumental Variables Estimation ◽  
Positive Effect

AbstractWe aim to investigate the simultaneous and interacted effects of central bank qualitative and quantitative communication on private inflation expectations, measured with survey and market-based measures. The effects of ECB inflation projections and Governing Council members’ speeches are identified through an instrumental-variables estimation using a principal component analysis to generate relevant instruments. We find that ECB projections have a positive effect on current-year forecasts, and that ECB projections and speeches are substitutes at longer horizons. Moreover, ECB speeches and the ECB rate reinforce the effect of ECB projections when they are consistent, and convey the same signal about inflationary pressures.

scholarly journals Development of Inflation Expectations in Serbia and a Comparative Analysis

2020 ◽  
Vol 9 (1) ◽  
pp. 61-79
Author(s):  
Vesna Martin
Keyword(s):  
Comparative Analysis ◽  
Trade Unions ◽  
Inflation Targeting ◽  
Inflation Expectations ◽  
Economic Agents ◽  
Inflation Expectation ◽  
Floating Exchange Rate ◽  
National Bank ◽  
Targeting Strategy

AbstractInflation expectations are very important when it comes to monetary policy and its decisions. In countries which are applying inflation targeting, inflation expectations reflect prediction of economic agents of movement of inflation rate in mid and long term. Anchored inflation expectations and their movements within target tolerance band are pointing to effectiveness of the inflation targeting strategy. Consistent with the best international practice, after introducing the inflation targeting regime in January 2009, the National Bank of Serbia began monitoring and analysing inflation expectations of economic agents (financial sector, corporate sector, trade unions, and households). The aim of this paper is to analyse inflation expectations in Serbia, but also to give a comparative analysis of inflation expectation of other countries which are using inflation targeting and floating exchange rate, as is the case of the National Bank of Serbia.

scholarly journals The Analysis of Monetary Transmission Mechaniscm by Expectation Patterns in Influencing the Inflation

2018 ◽  
Vol 6 (4) ◽  
pp. 412-419
Author(s):  
Ilma Ulfatul
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Transmission Mechanism ◽  
Output Gap ◽  
Inflation Expectations ◽  
Short Term ◽  
Inflation Expectation ◽  
Policy Transmission ◽  
Monetary Policy Transmission Mechanism

Bank Indonesia set inflation targeting framework from 1 July 2005 by publicizing the inflation target or forward inflation to the public. However, the phenomenon show that most of the actual inflation of Indonesia is not in accordance with inflation targeting that have been set by Bank Indonesia. The purpose of this research is to analyze and know the flow of monetary policy transmission mechanism of expectation line in influencing inflation, to analyze and to know the influence of long-term and short-term and the shocks of interest rate, exchange rate, inflation expectations, output gap and GDP on inflation in Indonesia. The variables used in this research are BI Rate, Exchange Rate, Inflation Expectation, Output Gap, GDP and Inflation. The data used in this research is monthly data of time series from January 2006 until June 2016 which come from Bank Indonesia (BI) and Central Statistic Agency (BPS). The method used in this research is Vector Error Correction Model (VECM). The result of research indicates that: The flow of monetary policy transmission mechanism of expectation line in influencing inflation in Indonesia runs continuously with indicated the existence of two-way relationship between exchange rate and inflation variable, in the short term, the BI Rate, Exchange Rate and Output Gap are significant and positively affect inflation, inflation expectation variables are significant and affect inflation and GDP variable is insignificant to inflation in Indonesia, while in long run variable affecting inflation rate are BI Rate and inflation expectations, based on the variance decomposits result shows that the biggest variant contributing to inflation in Indonesia is the BI Rate.

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