The credibility of monetary policy announcements: Empirical evidence for OECD countries since the 1960s

Ansgar Belke, Andreas Freytag (), Jonas Keil and Friedrich Schneider ()

International Review of Economics & Finance, 2014, vol. 33, issue C, 217-227

Abstract: Monetary policy rules have been considered as fundamental protection against inflation. However, empirical evidence for a correlation between monetary commitment to rules and price stability is relatively weak. We discuss likely causes for this weak link and argue that monetary commitment is not necessarily credible by itself without adequate policy assignment and an institutional framework enforcing the commitment. We further propose a proxy variable for monetary credibility in an empirical assessment of our theoretical arguments based on panel data covering 22 OECD countries and five decades. Results confirm the crucial role of a credibly backed monetary commitment for price stability.

Keywords: Monetary policy; Price stability; Central bank independence; Monetary commitment; Credibility (search for similar items in EconPapers)
JEL-codes: E31 E50 E52 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (9)

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Related works:
Working Paper: The Credibility of Monetary Policy Announcements: Empirical Evidence for OECD Countries since the 1960s (2012)
Working Paper: The Credibility of Monetary Policy Announcements - Empirical Evidence for OECD Countries since the 1960s (2012)
Working Paper: The Credibility of Monetary Policy Announcements – Empirical Evidence for OECD Countries since the 1960s (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:33:y:2014:i:c:p:217-227

DOI: 10.1016/j.iref.2014.05.005

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