Through the Pass-Through: Measuring Central Bank Credibility

Roberto Rigobon

No 143, CID Working Papers from Center for International Development at Harvard University

Abstract: In the last decade, the South African Reserve Bank has been carrying out an aggressive inflation targeting program. Judging by the decline in inflation, it could be argued that the central bank has been successful in controlling the inflation rate. However, “judging by the outcomes" is not necessarily the correct measure of how much credibility has been gained in this process. In fact, part of the decline in inflation could be the result of a reduction of inflation in the world, and not necessarily to good internal policy. In this short note, I evaluate how much credibility the central bank has gained in the last three years by using a unique data set that looks at firms’ decisions that are affected by the prospects of inflation. By using this measure I argue that indeed the Central Bank has gained significant credibility in recent years.

Keywords: South Africa; Pass-Through; Central Bank Credibility (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Date: 2007-03
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:cid:wpfacu:143

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