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Title:The credibility of monetary policy announcements: Empirical evidence for OECD countries since the 1960s PDF Logo
Authors:Belke, Ansgar
Freytag, Andreas
Keil, Jonas
Schneider, Friedrich
Issue Date:2012
Series/Report no.:Discussion Papers, German Institute for Economic Research, DIW Berlin 1225
Abstract:Monetary policy rules have been considered as fundamental protection against inflation. However, empirical evidence for a correlation between rules and inflation is relatively weak. In this paper, we first discuss likely causes for this weak link and present the argument that monetary commitment is not credible in itself. It can grant price stability best if it is backed by an adequate assignment of economic policy. An empirical assessment based on panel data covering five decades and 22 OECD countries confirms the crucial role of a credibly backed monetary commitment to price stability.
Subjects:credibility
central bank independence
price stability
monetary commitment
JEL:E31
E50
E52
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des DIW
DIW-Diskussionspapiere

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