Sentimental Outlook for the Monetary Policies of South African Reserve Bank
Keywords:South African Reserve Bank, Monetary Policy Committee (MPC) statements, tone and sentiment, central bank communication
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.
Antweiler, W., & Frank, M. Z. (2004). Is all that talk just noise? The information content of Internet stock message boards. Journal of Finance, 59(3), 1259-1294. https://doi.org/10.1111/j.1540-6261.2004.00662.x
Apel, M., & Blix Grimaldi. (2012). The Information Content of Central Bank Minutes. Working Paper Series 261, Sveriges Riksbank (Central Bank of Sweden). https://EconPapers.repec.org/RePEc:hhs:rbnkwp:0261.
Berg, C., & Jonung, L. (1998). Pioneering Price Level Targeting: The Swedish Experience 1931-1937, No 290, SSE/EFI Working Paper Series in Economics and Finance, Stockholm School of Economics.
Berger, H., Ehrmann, M., & Fratzscher, M. (2011). Monetary policy in the media. London: CEPR. https://doi.org/10.1111/j.1538-4616.2011.00392.x
Bernanke, B., & Mishkin, F. S. (1997). Inflation Targeting: A New Framework for Monetary Policy?. Cambridge, Mass: National Bureau of Economic Research. https://DOI: 10.1257/jep.11.2.97
Bernanke, B., Laubach, T., Mishkin, F., & Posen, A. (1999). Inflation Targeting: Lessons from the International Experience. PRINCETON; OXFORD: Princeton University Press. doi:10.2307/j.ctv301gdr
Bholat, D., Hansen, S., Santos, P., & Schonhardt-Bailey, C. (2015). Text mining for central banks. London: Bank of England. http://dx.doi.org/10.2139/ssrn.2624811
Binder, C. (June 01, 2017). Fed speak on main street: Central bank communication and household expectations. Journal of Macroeconomics, 52, 238-251. https://doi.org/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.
Blinder, A., Ehrmann, M., Fratzscher, M., De Haan, J., & Jansen, D. (2008). Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence. Journal of Economic Literature, 46(4), 910-945. DOI: 10.1257/jel.46.4.910
Born, B., Ehrmann, M., & Fratzscher, M. (2014). CENTRAL BANK COMMUNICATION ON FINANCIAL STABILITY. The Economic Journal, 124(577), 701-734. https://doi.org/10.1111/ecoj.12039
Bureau for Economic Research (2021) Inflation Expectation Survey.
Bulí?, A., ?ihák, M., & Šmídkova, K. Š. (2013b). Writing clearly: the ECB’s monetary policy communication. German Economic Review, 14(1), 50-72. https://doi.org/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.
Coenen, G., Ehrmann, M., Gaballo, G., Hoffmann, P., Nakov, A., Nardelli, S., ... & Strasser, G. (2017). Communication of monetary policy in unconventional times.
Cœure?, B. (2017). Central Bank Communication in a Low Interest Rate Environment. (Open economies review.) DOI: 10.1007/s11079-017-9459-7Bottom of Form
De Haan, J., Eijffinger, S. C. W., & Rybinski, K. (2007) Central Bank Transparency and Central Bank Communication: Editorial Introduction. European Journal of Political Economy, 23, 1-8. https://EconPapers.repec.org/RePEc:eee:poleco:v:23:y:2007:i:1:p:1-8.
Dincer, N., & Eichengreen, B. (2014). Central Bank Transparency and Independence: Updates and New Measures, International Journal of Central Banking, 10, issue 1, p. 189-259. http://dx.doi.org/10.2139/ssrn.2579544
Engelberg, J. (2008). Costly Information Processing: Evidence from Earnings Announcements. Ssrn Electronic Journal. http://dx.doi.org/10.2139/ssrn.1107998
Garriga, A. C. (2015). Central Bank Independence in the world: A new dataset. https://doi.org/10.1080/03050629.2016.1188813
Geraats, P.M. (2002), Central Bank Transparency*. The Economic Journal, 112: F532-F565. https://doi.org/10.1111/1468-0297.00082
Hayo, B., & Neuenkirch, M. (2014). Central bank communication in the financial crisis: Evidence from a survey of financial market participants. Marburg: Univ., Dep. of Business Administration & Economics. http://dx.doi.org/10.2139/ssrn.2376165
Kabundi, A., Schaling, E., & Some, M. (2015). Monetary policy and heterogeneous inflation expectations in South Africa. Economic Modelling, 45, 109-117. https://doi.org/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.
Kahveci, E., & Odabas?, A. (November 24, 2016). Central Banks’ Communication Strategy and Content Analysis of Monetary Policy Statements: The Case of Fed, ECB and CBRT. Procedia - Social and Behavioral Sciences, 235, 618-629. https://doi.org/10.1016/j.sbspro.2016.11.039
King, M. (January 01, 2015). Monetary Policy: Practice Ahead of Theory. 9-24..
Lehtima?ki, J. O., & Palmu, M. (May 01, 2019). Central Bank Communication and Monetary Policy Predictability under Uncertain Economic Conditions. Journal of Central Banking Theory and Practice, 8, 2, 5-32. https://EconPapers.repec.org/RePEc:cbk:journl:v:8:y:2019:i:2:p:5-32.
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
Li, F. (August 01, 2008). Annual report readability, current earnings, and earnings persistence. Journal of Accounting & Economics, 45, 2, 221.
Loughran, T., & McDonald, B. (January 01, 2011). When Is a Liability Not a Liability? Textual Analysis, Dictionaries, and 10-Ks. Journal of Finance New York-, 66, 1, 35-65. https://doi.org/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.
Mehrling, P., Moss, L., Pixley, J., & Tavlas, G. (2007). What If the Leader of the Central Bank Told Hilarious Jokes and Did Card Tricks? A Panel of Experts. The American Journal of Economics and Sociology, 66(5), 863-888. Retrieved July 28, 2021, from http://www.jstor.org/stable/27739674
Mishkin, F.S. (1995), Symposium on the monetary transmission mechanism. The Journal of Economic Perspectives, Vol. 9 No. 4, pp. 3-10. DOI: 10.1257/jep.9.4.3
Mishkin, F. S. (2000). Inflation targeting in emerging-market countries. American Economic Review, 90(2), 105-109. DOI:10.1257/aer.90.2.105
Mnyande, M. (2008) South Africa’s experience with monetary policy within an inflation-targeting policy framework
Picault, M., & Renault, T. (January 01, 2017). Words are not all created equal: A new measure of ECB communication. Journal of International Money and Finance, 79, 136-156. https://doi.org/10.1016/j.jimonfin.2017.09.005
Poole, W. (2003). Fed Transparency: How, Not Whether. Federal Reserve Bank of St. Louis Review, November/December, 1-8.
Reid, M., & Du, P. S. (September 01, 2010). Loud and Clear? Can We Hear When The SARB Speaks?. South African Journal of Economics, 78, 3, 269-286. https://doi.org/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).
Reid, M., Bergman, Z., Plessis, S. D., Bergman, M. M., & Siklos, P. (2014). Inflation and Monetary Policy: What South African Newspapers Report in an Era of Policy Transparency. Journal of Economic Issues, 54, 3, 732-754. https://doi.org/10.1080/00213624.2020.1787045
Reid, M., Siklos, P. L., Guetterman, T. C., & Du, P. S. (2020). The role of financial journalists in the expectations channel of the monetary transmission mechanism. https://doi.org/10.1016/j.ribaf.2020.101320
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
Siklos, P.L. (2013). The Global Financial Crisis and the Language of Central Banking: Central Bank Guidance in Good Times and in Bad, CAMA Working Papers 2013-58, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University. http://dx.doi.org/10.2139/ssrn.2317062
Siklos, P.L. (2014). Communications Challenges for Multi?Tasking Central Banks: Evidence, Implications. International Finance, 17: 77-98. https://doi.org/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.
Su, S., Ahmad, A.H. & Wood, J. (2020). How effective is central bank communication in emerging economies? An empirical analysis of the chinese money markets responses to the people’s bank of China’s policy communications. Rev Quant Finan Acc 54, 1195–1219. https://doi.org/10.1007/s11156-019-00822-7
Svensson, L. E. O. (1997). Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets. Cambridge, Mass: National Bureau of Economic Research. https://doi.org/10.1016/S0014-2921(96)00055-4
Svensson, L. E. O. (January 01, 1999). Inflation Targeting as a Monetary Policy Rule. Journal of Monetary Economics, 43, 3, 607-654. https://doi.org/10.1016/S0304-3932(99)00007-0
Swarnalatha. S., Kesavarthini. I., Poornima. S., & Sripriya N. (2019). Med-Recommender System for Predictive Analysis of Hospitals and Doctors. International Conference on Computational Intelligence in Data Science (ICCIDS), Chennai, India, 2019, pp. 1-5. doi: 10.1109/ICCIDS.2019.8862121
Top of Form
Tetlock, P. C. (January 01, 2007). Giving content to investor sentiment: the role of media in the stock market. The Journal of Finance, 62, 3, 1139-1168. https://doi.org/10.1111/j.1540-6261.2007.01232.x Bottom of Form
Yellen, J. (October 01, 2018). Comments on Monetary Policy at the Effective Lower Bound. Brookings Papers on Economic Activity, 573-588.
How to Cite
Copyright (c) 2021 International Journal of Finance & Banking Studies (2147-4486)
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Authors contributing to IJFBS agree to publish their articles under the Creative Commons Attribution- 4.0 NC license, allowing third parties to share their work (copy, distribute, transmit) and to adapt it, under the condition that the authors are given credit, that the work is not used for commercial purposes, and that in the event of reuse or distribution, the terms of this license are made clear. Authors retain copyright of their work, with first publication rights granted to IJFBS. However, authors are required to transfer copyrights associated with commercial use to the Publisher. The authors agree to the terms of this Copyright Notice, which will apply to this submission if and when it is published by this journal
Submission of an article implies that the work described has not been published previously( exceptin the form of an abstract or as part of a published lecture or academic thesis), that it is not under consideration for publication elsewhere, that its publication is approved by all authors and tacitly or explicitly by the responsible authorities where the work was carried out, and that, if accepted, it will not be published elsewhere in the same form, in English or in any other languages, without the written consent of the Publisher. The Editors reserve the right to edit or otherwise alter all contributions, but authors will receive proofs for approval before publication