Sentimental Outlook for the Monetary Policies of South African Reserve Bank

Abstract

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.

Keywords: {'name': 'South African Reserve Bank'}, {'name': 'Monetary Policy Committee (MPC) statements'}, {'name': 'tone and sentiment'}, {'name': 'central bank communication'}

Authors & affiliations

Arnold Segawa
Affiliation not supplied

Deposited references

Supplied references, not a list of publications citing this article.

DOI: 10.1111/j.1540-6261.2004.00662.x

DOI: 10.2139/ssrn.2092575

DOI: 10.1016/S0304-3932(99)00004-5

DOI: 10.1111/j.1538-4616.2011.00392.x

DOI: 10.3386/w5893

DOI: 10.2307/j.ctv301gdr

DOI: 10.2139/ssrn.2624811

DOI: 10.1016/j.jmacro.2017.05.003

Blinder, A., Goodhart, C., Hildebrand, P., Lipton, D., & Wyplosz, C. (2001). How do Central Banks Talk?. Geneva Reports on the World Economy.

Blinder, A., & Wyplosz, C. (2004). Central Bank Talk: Committee Structure and Communication Policy, prepared for the session on “Central Bank Communication” at the ASSA meetings. Philadelphia, January 9th.

DOI: 10.1257/jel.46.4.910

DOI: 10.1111/ecoj.12039

Bureau for Economic Research (2021) Inflation Expectation Survey.

DOI: 10.1111/j.1468-0475.2011.00562.x

Cannon, S. (2015). Sentiment of the FOMC: Unscripted. Economic Review-Federal Reserve Bank of Kansas City, 5. https://EconPapers.repec.org/RePEc:fip:fedker:00032.

Central Bank Governance Group, & Ortiz-Martinez, G. (2009). Issues in the governance of central banks: a report from the Central Bank Governance Group. Basel, Switzerland, Bank for International Settlements.

Chen, K. (2015) Use Python to calculate the tone of financial articles

Chen, K. (2016) “Interpreting the Fedspeak: Text Analysis on FOMC Statements.” U.S. Economic Watch, 27 Sept. 2016, pp. 1–5.

DOI: 10.2139/ssrn.3043098

DOI: 10.1007/s11079-017-9459-7

DOI: 10.1016/j.ejpoleco.2006.09.010

DOI: 10.2139/ssrn.2579544

DOI: 10.2139/ssrn.1107998

DOI: 10.1080/03050629.2016.1188813

DOI: 10.1111/1468-0297.00082

DOI: 10.2139/ssrn.2376165

DOI: 10.1016/j.econmod.2014.11.002

Kahn, G. A. (January 01, 2007). Communicating a Policy Path: The Next Frontier in Central Bank Transparency?. Economic Review, 92, 1, 25-52.

DOI: 10.1016/j.sbspro.2016.11.039

DOI: 10.1002/9781119205814.ch2

DOI: 10.2478/jcbtp-2019-0011

Leiderman, L., & Svensson, L. E. O. (1995). Inflation Targets. London 25-28 Old Burlington Street: Centre for Economic Policy Research. ISBN: 9781898128212

Top of Form

DOI: 10.1016/j.jacceco.2008.02.003

DOI: 10.1111/j.1540-6261.2010.01625.x

Luangaram, P., & Wongwachara, W. (2017). More than words: a textual analysis of monetary policy communication. PIER Discussion Papers, 54.

Marques, L. B., Gelos, G., Harjes, T., Sahay, R., & Xue, Y. (2021). Monetary policy transmission in emerging markets and developing economies.

Mboweni, T. (2004). Monetary Policy and the Markets: A two-way Street. Presented at The Star/Safmarine Breakfast, Johannesburg Country Club, 7 September 2006.

Mboweni, T. (2004). The monetary policy framework of South Africa Address by Mr T T Mboweni, Governor of the South African Reserve Bank, at the International Investors Conference, Sun City, 24 March 2004.

DOI: 10.1111/j.1536-7150.2007.00544.x

DOI: 10.1257/jep.9.4.3

DOI: 10.1257/aer.90.2.105

DOI: 10.1787/9789264044630-7-en

DOI: 10.1016/j.jimonfin.2017.09.005

DOI: 10.20955/r.85.1-8

DOI: 10.1111/j.1813-6982.2010.01246.x

Reid, M. (2011). Communication as a Strategic Monetary Policy Tool: An Evaluation of the Effectiveness of the South African Reserve Bank’s Communication. Stellenbosch University, Department of Economics. (Unpublished doctoral dissertation).

DOI: 10.1080/00213624.2020.1787045

DOI: 10.2139/ssrn.3583279

Reid, M., & Siklos, P. L. (2020). Building credibility and influencing expectations: The evolution of central bank communication.

Sardelich, M., & Kazakov, D. (2018) Extending the Loughran and McDonald Financial Sentiment Words List from 10-K Corporate Fillings using Social Media Texts

DOI: 10.2139/ssrn.2317062

DOI: 10.1111/infi.12043

Siklos, P.L. (2018). Has Monetary Policy Changed? How the Crisis Shifted the Ground Under Central Banks. Working Paper series 18-10, Rimini Centre for Economic Analysis.

South African Reserve Bank. (2014). Monetary Policy Review, June 2014. Pretoria: SARB.

South African Reserve Bank. (2014). Monetary Policy Review, December 2014. Pretoria: SARB.

South African Reserve Bank, (2018a). Annual Report 2017/18. SARB.

South African Reserve Bank. (2018b). Monetary Policy Review, December 2018. Pretoria: SARB.

DOI: 10.1007/s11156-019-00822-7

DOI: 10.2139/ssrn.1334

DOI: 10.1016/S0304-3932(99)00007-0

DOI: 10.1109/ICCIDS.2019.8862121

Top of Form

DOI: 10.1111/j.1540-6261.2007.01232.x

DOI: 10.1353/eca.2018.0013