Monetary policy credibility: A Phillips curve view

Christopher Malikane and Tshepo Mokoka

The Quarterly Review of Economics and Finance, 2012, vol. 52, issue 3, 266-271

Abstract: The paper investigates the presence of monetary policy credibility in eight countries by filtering the residuals from an “augmented” Phillips curve. Two of the eight countries (US and New Zealand) exhibit robust credibility effects across samples. Two countries (South Africa and the UK) exhibit credibility effects in the sample involving the 1990s, but these effects disappear in the sample beginning in 2000. The rest of the countries do not exhibit monetary policy credibility. Given that seven of the eight countries have adopted an explicit inflation-targeting framework, we conclude that there is very weak evidence that this framework enhances monetary policy credibility. These results are however sensitive to how inflation and the output gap are measured.

Keywords: Credibility; Inflation expectations; Monetary policy (search for similar items in EconPapers)
JEL-codes: E43 E52 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:52:y:2012:i:3:p:266-271

DOI: 10.1016/j.qref.2012.05.002

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