With the migration to inflation targeting, many central banks embarked on a path of communication, in addition to setting an explicit inflation target. This paper relies on the South Africa Reserve Bank’s (SARB) communication instruments and the key monetary policy (repo) rate to establish a relationship between SARB’s signalling and the path of future rate actions. We examine the SARB’s monetary policy committee statements from 2000 to 2023 to come up with indices of clarity, subjectivity and polarity. Empirical results from the multivariable Granger causality tests confirm a unidirectional Granger causality from Flesch-Kincaid (clarity indicator) to the repo rate which implies cointegration between the two. The impulse response analysis shows that a shock from the clarity and polarity indicators has a significant impact on the repo rate.

References are not ready for this file yet, please refer to reference from the PDF file

Keywords

Central bank communication, monetary policy transmission, vector autoregression, South Africa