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The NBU's Credibility in the Formation of Firms' Inflation Expectations

Kateryna Savolchuk () and Tetiana Yukhymenko ()
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Kateryna Savolchuk: National Bank of Ukraine
Tetiana Yukhymenko: National Bank of Ukraine

No 04/2023, Working Papers from National Bank of Ukraine

Abstract: This study investigates the influence of central bank credibility in forming inflation expectations, using data obtained from business surveys conducted by the National Bank of Ukraine. We employ a two-stage treatment model to mitigate the potential bias of the endogeneity of firms' answers. The results confirm the vital role of credibility in shaping inflation expectations. Notably, credibility reduces sensitivity to past inflation deviations. Robustness checks, which are based on bootstrapping, reinforce the reliability of the findings. Our study underscores the importance of central bank credibility in anchoring inflation expectations.

Keywords: credibility; inflation expectations; endogeneity; surveys (search for similar items in EconPapers)
JEL-codes: C51 E58 E70 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2023-12
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cis, nep-eec, nep-mon and nep-tra
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Handle: RePEc:ukb:wpaper:04/2023