Causality Analysis of South Africa Reserve Bank’s Monetary Policy Statements and Communication

This paper inspects whether the South Africa Reserve Bank’s (SARB) Monetary Policy Committee (MPC) statements trigger have a causality with newspaper reports from the Mail and Guardian between 2010 and 2021. The study examines whether SARB’s post MPC statements’ readability is reciprocated in the subsequent Mail and Guardian newspaper articles. Using the Flesch Reading Ease Score and Flesch-Kincaid Grade Level score as the methodology, there is a systematic unpacking of both SARB’s MPC statements and newspaper reports from the Mail and Guardian which yield a dataset which is subsequently used to create a computation. This computation is then used to examine whether SARB’s MPC statements Granger cause the subsequent Mail and Guardian newspaper articles. Resultantly, the results show that there is no Granger causality between the SARB’s MPC statements and the Mail and Guardian’s Flesch Reading Ease Score and Flesch-Kincaid Grade Level score.

Central Bank Communications and Professional Forecasts: Evidence From India

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

Evaluation of the Inflation Forecasting Process of the Reserve Bank of India: A Text Analysis Approach

This study attempts to evaluate the monetary policy of the Reserve Bank of India (RBI) based on an investigation of the policy statements. The analysis based on text mining of the central bank’s monetary policy statements seeks to unravel the information considered by the central bank and the processes followed in making its inflation forecasts. The findings indicate that although the RBI examined high-frequency economic indicators, its inflation forecasts have generally been off the mark. Specifically, the monetary policy committee failed to foresee the sharp disinflation that followed the demonetization announced on November 8, 2016. This failure resulted in a high real interest rate regime that dealt a blow to the economy staggering under the effects of demonetization. Our research findings show that the monetary policy governance practices need to be refined and better aligned to economic realities, particularly under the RBI’s new monetary policy framework.

COVID 19 & THE WORLD ECONOMY: STRATEGIES FOR ECONOMIC RECOVERY AND SUSTAINABILITY SAVINGS INTEREST RATE REVIEW IN NIGERIA

The emergence of COVID 19 has adversely affected the global economy as it has practically shut down the global economy since its emergence. Governments of each country have taken drastic decisions in order to save its citizens from the death associated with this highly infectious disease. Such decisions include; total halt in academic, economic and social activities. This has adversely shrunk the economies as their revenue generation power dwindled with an increased expenditure on research, palliatives and sensitisation about the disease. A near collapse of the global economy has been projected towards end of 2020. In order to avert this, economic decision makers are taking different actions and policies that will reduce the shock of this disaster and also revamp the economy. This period coincides with when Nigerian economy is just recovering from the 2016 economic recession with declining per capita income as well as collapsing global oil prices. In order to recover the economy which has previously been characterised by dwindling economic indicators, the Government applied some structural changes targeted at the Medium and Small scale enterprises. To further recover the Nigerian economy, the Central Bank of Nigeria through the Monetary Policy Committee has announced a cut in the savings interest rate on local currency to be negotiable subject to 10 percent of the Monetary Policy Rate which is 12.5 percent effective September 1, 2020 leaving the minimum savings rate at 1.25 percent. This will reviewed and accessed as it affects investment, GDP, Consumption, Savings and how quickly and effectively this can revamp the economy considering all other factors such as the Foreign Direct Investment and the fluctuating global oil prices.

Quarterly Projection Model for the National Bank of Rwanda

National Bank of Rwanda (BNR) modernized monetary policy and transited to the price-based policy framework in January 2019. The Forecasting and Policy Analysis System (FPAS) is the cornerstone for the new forward-looking framework, which mobilizes and organizes resources and sets processes for regular forecasting rounds. The core of this system is a structural macroeconomic model for macroeconomic analysis and projections to support the BNR staff’s policy recommendations to the monetary policy committee. This paper documents the quarterly projection model (QPM) at the core of the FPAS at the BNR. The model is an extension of the canonical structure in Berg et al (2006) to reflect specifics of the interest-rate-based policy framework with a managed exchange rate, the effect of agricultural sector and harvests on prices, and the role of fiscal policies and aid flows.

Effects of Money Demand on Trade Balance in Nigeria

Previous studies appear to have concentrated on the effects of currency depreciation on trade balance and macroeconomic policy, while the relationship between money demand and trade balance is scantly documented in the literature. This paper therefore examines the effects of money demand on trade balance in Nigeria. For the analysis conducted, annual time series data covering the period ranging from 1986 to 2018 were used along with the Autoregressive Distributed Lag (ARDL) estimation technique. The long‑run coefficient of money demand was positively signed and statistically significant at 5% level. The positive relationship exhibited by the coefficient of money demand in the long run had a significant influence on trade balance. Thus, this implied that a unit percent increase in money demand would lead to a 1.57% significant increase in trade balance. The implication of this finding was that money demand had significantly influenced trade balance, enhancing the production of goods and fostering investment, which had led to increased growth. The paper recommends that the Central Bank of Nigeria through the Monetary Policy Committee should amend qualitative and quantitative credit control policies with the aim of improving lending to enhance the flow of credit to the real and exporting sector of the economy in order to bring about the desired effect on trade balance. However, the study is limited to an analysis of the existence of the relationship between money demand and trade balance using the Nigerian data set.

Evaluation of the Inflation Forecasting Process of the Reserve Bank of India: A Text Analysis Approach

<div><div><div><p>This study is an attempt to evaluate and interpret the monetary policy statements (MPS) of the Reserve Bank of India (RBI) for the five year period since it started conducting monetary policy meetings every alter- nate month. An important contribution of this paper is the evaluation of the inflation forecasting path of the RBI using information from the state- ments. Both qualitative and quantitative methodology has been adopted to study and evaluate the MPS. It helps in understanding processes fol- lowed and information considered while making inflation forecasts. The results clearly indicate that though the RBI examined the high frequency economic indicators in their process of assessment and inflation forecast- ing, their inflation forecasts have been below the mark. Similarly, the monetary policy committee (MPC) could not predict the sharp disinfla- tion following demonetization on 8th November, 2016 resulting in higher real interest rate regime. This shows that the monetary policy governance under the new monetary policy framework of the RBI needs to be revisited to align it with the economic reality of India.</p></div></div></div>

Evaluation of the Inflation Forecasting Process of the Reserve Bank of India: A Text Analysis Approach

<div><div><div><p>This study is an attempt to evaluate and interpret the monetary policy statements (MPS) of the Reserve Bank of India (RBI) for the five year period since it started conducting monetary policy meetings every alter- nate month. An important contribution of this paper is the evaluation of the inflation forecasting path of the RBI using information from the state- ments. Both qualitative and quantitative methodology has been adopted to study and evaluate the MPS. It helps in understanding processes fol- lowed and information considered while making inflation forecasts. The results clearly indicate that though the RBI examined the high frequency economic indicators in their process of assessment and inflation forecast- ing, their inflation forecasts have been below the mark. Similarly, the monetary policy committee (MPC) could not predict the sharp disinfla- tion following demonetization on 8th November, 2016 resulting in higher real interest rate regime. This shows that the monetary policy governance under the new monetary policy framework of the RBI needs to be revisited to align it with the economic reality of India.</p></div></div></div>

Crafting Consensus

This chapter introduces central bankers as “wordsmiths,” skilled users of words, who work together to construct and edit a monetary policy statement with an intention to drive the economy by shaping the public’s beliefs about the future. The chapter starts off showing that central bankers can be both relatively vague and relatively precise with the language that they use. Baerg highlights previous explanations on the benefits of delegating monetary policy to a monetary policy committee rather than to a single individual. Known benefits include better information aggregation and problem-solving. The author introduces the argument that monetary policy committees that have diverse policy preferences are more likely to be precise and illustrates, using examples from Federal Open Market Committee (FOMC) transcript data, how policy makers bargain over the policy statement in ways similar to how they negotiate changes in interest rates. The chapter concludes with a brief overview of the structure of the manuscript.