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Three dimensions of central bank credibility and inferential expectations: The Euro zone

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  • Henckel, Timo
  • Menzies, Gordon D.
  • Moffatt, Peter
  • Zizzo, Daniel J.
Abstract
We use the behavior of inflation among Eurozone countries to provide information about the degree of credibility of the European Central Bank (ECB) since 2008. We define credibility along three dimensions–official target credibility, cohesion credibility and anchoring credibility–and show in a new econometric framework that the latter has deteriorated in recent history; that is, price setters are less likely to rely on the ECB target when forming inflation expectations.

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  • Henckel, Timo & Menzies, Gordon D. & Moffatt, Peter & Zizzo, Daniel J., 2019. "Three dimensions of central bank credibility and inferential expectations: The Euro zone," Journal of Macroeconomics, Elsevier, vol. 60(C), pages 294-308.
    • Handle: RePEc:eee:jmacro:v:60:y:2019:i:c:p:294-308
    DOI: 10.1016/j.jmacro.2019.01.012
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    More about this item

    Keywords

    Credibility; Inflation; Expectations; Anchoring; Monetary union; Inferential expectations;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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