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.

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 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 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.

DETERMINANTS OF INFLATION IN INDIA IN A DYNAMIC SETUP

2021 ◽  
pp. 1-20
Author(s):  
MASUDUL HASAN ADIL ◽  
MOHAMMAD AZEEM KHAN ◽  
HAROON RASOOL
Keyword(s):  
Open Economy ◽  
High Frequency ◽  
Inflation Targeting ◽  
Explanatory Variable ◽  
Household Survey ◽  
Inflation Expectations ◽  
Bounds Testing ◽  
Inflation Expectation ◽  
Long Run ◽  
Bounds Testing Approach

The present study empirically examines the factors accounting for inflation in India in an open economy framework by utilizing the bounds testing approach to cointegration for the 2006: Q3-2019: Q4 period. The findings reveal the existence of a long-run relationship with the household survey-based inflation expectation, real output, narrow money aggregate and interest rate as important determinants of inflation. The study concludes that inflation is well explained by a combination of structural and monetary factors. Notably, the significance of inflation expectation as an important explanatory variable corroborates the utilization of inflation forecast by the RBI as an intermediate target in the flexible inflation targeting framework. In this backdrop, it is imperative for RBI to conduct a high frequency inflation expectations survey of households to account for frequent information updation on the part of certain groups of households.

South African turnaround strategy may disappoint

2018 ◽  
Keyword(s):  
Interest Rates ◽  
South African ◽  
Economic Reforms ◽  
Inflation Expectations ◽  
Structural Reforms ◽  
Content Type ◽  
Reserve Bank ◽  
Do So

Significance After the economy's recent shock entry into technical recession, Ramaphosa's administration is attempting to show its commitment to growth-boosting reforms. Impacts The reserve bank will be loath to hike interest rates but may be forced to do so in the coming months to curb rising inflation expectations. Mooted structural reforms may not go far enough to placate investors. Persistent ANC infighting could undermine Ramaphosa’s efforts to pursue contested economic reforms prior to 2019 polls.

Central Bank Communications and Professional Forecasts: Evidence From India

2021 ◽  
pp. 097265272110440
Author(s):  
Ashima Goyal ◽  
Prashant Parab
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Jel Classification ◽  
Inflation Expectations ◽  
Speed Of Adjustment ◽  
Inflation Forecasts ◽  
Monetary Policy Committee ◽  
Reserve Bank ◽  
Policy Statements ◽  
Repo Rate

We analyze the influence of qualitative and quantitative communications of the Reserve Bank of India (RBI) on inflation expectations of professional forecasters and draw out implications for policy. Estimating Carroll-type epidemiological models of expectation formation under information rigidities, we get a large speed of adjustment of professional forecasters’ expectations. Analysis of the determinants of inflation forecasts, inflation surprises, and forecaster disagreement reveals significant influence of quantitative RBI communications in the form of inflation projections. This effect is prominent for shorter-horizon forecasts and after adoption of flexible inflation targeting. Macroeconomic fundamentals like lagged inflation and repo rate also significantly influence inflation forecasts. Choice of words in the RBI monetary policy statements has more impact after October 2016, when the monetary policy committee became the decision-making body. JEL Classification: E31, E52, E58

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.

scholarly journals Inflation Targeting Monetary Policy and Unemployment in South Africa

2018 ◽  
Vol 10 (4(J)) ◽  
pp. 88-96 ◽  
Author(s):  
Harris Maduku ◽  
Irrshad Kaseeram
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
Monetary Policy ◽  
Exchange Rate ◽  
South African ◽  
Inflation Targeting ◽  
Annual Data ◽  
The South ◽  
Reserve Bank ◽  
The Impact

We analyze the impact of inflation, growth and exchange rate on unemployment in South Africa using annual data spanning 1980- 2017. Using the ARDL methodology we find that there is a negative longrun relationship between inflation and unemployment in South Africa and inflation is significant in explaining unemployment. Other variables of interest, economic growth and exchange rate are also significant in explaining unemployment. We use the findings of our study to propose that the South African Reserve Bank(SARB) should consider revising its objectives so that they can consider getting involved in targeting unemployment so that they help nurse the economy from the wounds of high inequality and poverty. 

scholarly journals Modeling Monetary Policy In South Africa: Focus On Inflation Targeting Era Using A Simple Learning Rule

2010 ◽  
Vol 9 (12) ◽  
Author(s):  
Ruthira Naraidoo ◽  
Rangan Gupta
Keyword(s):  
South Africa ◽  
Monetary Policy ◽  
Interest Rates ◽  
South African ◽  
Inflation Targeting ◽  
Inflation Rate ◽  
Learning Rule ◽  
Model Specification ◽  
Reserve Bank ◽  
Downward Deviation

A simple empirical nonlinear framework is used to analyze monetary policy between 1983 and 2007 in South Africa, focusing on the policy of inflation targeting introduced in Feb 2000, more precisely when the South African Reserve Bank (SARB) announced that an inflation zone targeting regime of 3-6% would be in place. We find that a model specification embodying a simple ‘inflation learning rule’ for the future inflation rate seems to provide a better understanding of the decision process made by the SARB in its interest rate setting policy. The main findings are:  1) that the adoption of inflation targeting led to significant changes in monetary policy, 2) post-2000 monetary policy is asymmetric as policymakers respond more to downward deviation of inflation away from the target, 3) post-2000 policymakers may be attempting to keep inflation within the 4.5%–6.9% range rather than pursuing a target zone of 3-6%, as generally pre-announced, and 4) the response of monetary policy to inflation is nonlinear as interest rates respond more when inflation is further from the target.

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