Testing for Credibility Effects

Pierre-Richard Agénor and Mark Taylor

No 1991/110, IMF Working Papers from International Monetary Fund

Abstract: This paper examines some recent techniques designed to draw inferences about the credibility of changes in macroeconomic policy regimes. An alternative two-step approach, based on the decomposition between permanent and transitory components of a "credibility variable" is proposed. The methodology is then used to test for the existence of a credibility effect in the Cruzado stabilization plan implemented in Brazil in 1986.

Keywords: WP; exchange rate; inflation rate; policy regime changes; policy credibility; two-step methodology; policy outcome; disinflation policy; policy target; disinflationary policy; excess demand; policy predictability; stabilization policy; policy variable; state vector; Inflation; Price controls; Exchange rates; Government debt management (search for similar items in EconPapers)
Pages: 33
Date: 1991-11-01
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Citations: View citations in EconPapers (14)

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Journal Article: Testing for Credibility Effects (1992)
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