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Endogenous Monetary Policy Credibility in Ukraine

Kateryna Savolchuk () and Anton Grui ()
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Kateryna Savolchuk: National Bank of Ukraine
Anton Grui: National Bank of Ukraine

No 02/2022, Working Papers from National Bank of Ukraine

Abstract: In this paper, authors introduce endogenous monetary policy credibility into a semi-structural New Keynesian model. The model is estimated based on data for Ukraine, which de facto adopted inflation-targeting at the end of 2015. Authors model credibility as a nonlinear function of two gaps – actual and expected deviations of inflation from its target. Credibility is asymmetric as above-target inflation reduces it more than below-target. Authors show how low policy credibility can make economic stabilization more costly, and expansionary policy – counterproductive. It can also generate the price puzzle. Furthermore, we estimate the historical path of monetary policy credibility in Ukraine.

Keywords: New Keynesian model; monetary policy credibility; inflation expectations (search for similar items in EconPapers)
JEL-codes: C51 E52 E58 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2022-06
New Economics Papers: this item is included in nep-cba, nep-cis, nep-dge, nep-mon and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:ukb:wpaper:02/2022

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