A recent South African Reserve Bank's (SARB) paper analyzed the impact of change in communication adopted in January 2014 on the predictability of monetary policy by economists and financial market participants.
Throughout 2014 the South African Reserve Bank (SARB) explicitly communicated that monetary policy was on a rising cycle until normalisation is reached.
The results based on descriptive analysis and a nonparametric change points model confirm the influence of the "rising cycle" talk in shaping expectations of both economic experts and financial market participants on the future path of the reaction function of the SARB. Besides the surprise effects of January 2014, agents clearly predicted subsequent rate hikes based on the guidance received from the SARB. Previous rising interest rate cycles do not portray the same degree of predictability by analysts.
The paper bridged the gap existing in literature on the predictability of monetary policy by market participants in South Africa, and provides a useful case study for other countries in Africa and other developing countries seeking to enhance communication on monetary policy.