Central Bank Credibility

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Central Bank Credibility Reputation And Inflation Targeting In Historical Perspective

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Author : Michael D. Bordo
language : en
Publisher:
Release Date : 2014

Central Bank Credibility Reputation And Inflation Targeting In Historical Perspective written by Michael D. Bordo and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with Banks and banking, Central categories.

This paper examines the historical evolution of central bank credibility using both historical narrative and empirics for a group of 16 countries, both advanced and emerging. It shows how the evolution of credibility has gone through a pendulum where credibility was high under the classical gold standard before 1914 before being lost and not fully regained until the 1980s. This characterization does not, however, seem to apply to the monetary history in the emerging markets examined in the paper. Nevertheless, credibility in all the economies examined has been enhanced in recent decades thanks to the adoption of inflation targeting. However, the recent financial crisis and the call for central banks to focus more on financial stability relying on macro prudential regulation may pose significant challenges for central bank credibility.

Central Bank Independence Targets And Credibility

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Author : Francesco Lippi
language : en
Publisher: Edward Elgar Publishing
Release Date : 1999-01-27

Central Bank Independence Targets And Credibility written by Francesco Lippi and has been published by Edward Elgar Publishing this book supported file pdf, txt, epub, kindle and other format this book has been release on 1999-01-27 with Business & Economics categories.

This book integrates new political and economic elements into the analysis of monetary policy credibility and central bank independence. The author considers imperfect monetary control, rational voters, distributional issues and uncertainty about future policy objectives in his welfare analysis of central banking. The role played by the different institutional elements that contribute to the making of an independent central bank is also assessed. A distinction is made between central bank independence and targets offering new insights into how a more inflation averse monetary policy may actually be achieved. Finally, explanations for the variation of central bank independence and conservatism across different countries are provided. This book will appeal to researchers, academics and policy makers in the fields of monetary policy, financial economics, money and banking and political economy.

Living Up To Expectations

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Author : Stephen Cole
language : en
Publisher:
Release Date : 2023

Living Up To Expectations written by Stephen Cole and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023 with Macroeconomics categories.

This paper studies the effectiveness of forward guidance when central banks have imperfect credibility. Exploiting unique survey-based measures of expected inflation, output growth, and interest rates, we estimate a small-scale New Keynesian model for the United States and other G7 countries plus Spain allowing for deviations from full information rational expectations. In our model, the key parameter that aggregates heterogeneous expectations captures the central bank's credibility and affects the overall effectiveness of forward guidance. We find that the central banks of the U.S., the U.K., Germany, and other major advanced economies have similar levels of credibility (albeit far from full credibility); however, Japan's central bank credibility is much lower. For each country, our measure of credibility has declined over time, making forward guidance less effective. In a counterfactual analysis, we document that inflation would have been significantly higher, and the zero lower bound on short-term interest rates much less of an issue, in the wake of the Global Financial Crisis had the public perceived central bank forward guidance statements to be perfectly credible. Moreover, inflation would have declined more, and somewhat faster, with perfect credibility in the wake of the inflation surge post-COVID-19.

Central Bank Credibility Before And After The Crisis

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Author : Michael D. Bordo
language : en
Publisher:
Release Date : 2015

Central Bank Credibility Before And After The Crisis written by Michael D. Bordo and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with Banks and banking, Central categories.

A new measure of credibility is constructed as a function of the differential between observed inflation and some estimate of the inflation rate that the central bank targets. The target is assumed to be met flexibly. Credibility is calculated for a large group of both advanced and emerging countries from 1980 to 2014. Financial crises reduce central bank credibility and central banks with strong institutional determinants tend to do better when hit by a shock of the magnitude of the 2007-2008 financial crisis. The VIX, adopting an inflation target and central bank transparency, are the most common determinants of credibility. Similarly, real economic growth has a significant influence on central bank credibility even in inflation targeting economies. Hence, responding to real economic factors is necessarily detrimental to central bank credibility. Nevertheless, caution is in order about whether monetary authorities should take on broader responsibilities for the financial performance of economies.

The European Central Bank

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Author : Jakob De Haan
language : en
Publisher: MIT Press
Release Date : 2005-04-15

The European Central Bank written by Jakob De Haan and has been published by MIT Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005-04-15 with Business & Economics categories.

An examination of the debates on European Central Bank monetary policy, focusing on issues of transparency, credibility, and accountability and the effect of the ECB's decentralized structure. The adoption of the euro in 1999 by 11 member states of the European Union created a single currency area second in economic size only to the United States. The euro zone's monetary policy is now set by the European Central Bank (ECB) and its Governing Council rather than by individual national central banks. This CESifo volume examines issues that have arisen in the first years of ECB monetary policy and analyzes the effect that current ECB policy strategy and structures may have in the future. After a detailed description and assessment of ECB monetary policy making that focuses on such issues as price stability and the predictability of policy decisions, the book turns to two important issues faced by European central bankers: the transparency and credibility of decision making and the ECB's decentralized structure. After showing that transparency in decision making enhances credibility, the book discusses the ECB's efforts at openness, its political independence as guaranteed by law, and its ultimate accountability. The book then considers the effects of the decentralized ECB structure, focusing on business cycle synchronization, inflation differentials, and differences in monetary policy transmission in light of the enlargement of the monetary union. The book also discusses options for ECB institutional reforms, including centralization, vote weighting, and cross-border regional banks.

Central Bank Credibility

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Author : Michael D. Bordo
language : en
Publisher:
Release Date : 2015

Central Bank Credibility written by Michael D. Bordo and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with Banks and banking, Central categories.

In this paper we provide empirical measures of central bank credibility and augment these with historical narratives from eleven countries. To the extent we are able to apply reliable institutional information we can also indirectly assess their role in influencing the credibility of the monetary authority. We focus on measures of inflation expectations, the mean reversion properties of inflation, and indicators of exchange rate risk. In addition we place some emphasis on whether credibility is particularly vulnerable during financial crises, whether its evolution is a function of the type of crisis or its kind (i.e., currency, banking, sovereign debt crises). We find credibility changes over time are frequent and can be significant. Nevertheless, no robust empirical connection between the size of an economic shock (e.g., the Great Depression) and loss of credibility is found. Second, the frequency with which the world economy experiences economic and financial crises, institutional factors (i.e., the quality of governance) plays an important role in preventing a loss of credibility. Third, credibility shocks are dependent on the type of monetary policy regime in place. Finally, credibility is most affected by whether the shock can be associated with policy errors.

Central Bank Strategy Credibility And Independence

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Author : Alex Cukierman
language : en
Publisher: MIT Press
Release Date : 1992

Central Bank Strategy Credibility And Independence written by Alex Cukierman and has been published by MIT Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 1992 with Business & Economics categories.

This book brings together a large body of Cukierman's research and integrates it with recent developments in the political economy of monetary policy.

Sovereign Debt Sustainability And Central Bank Credibility

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Author : Tim Willems
language : en
Publisher: International Monetary Fund
Release Date : 2022-01-28

Sovereign Debt Sustainability And Central Bank Credibility written by Tim Willems and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022-01-28 with Business & Economics categories.

This article surveys the literature on sovereign debt sustainability from its origins in the mid-1980s to the present, focusing on four debates. First, the shift from an “accounting based” view of debt sustainability, evaluated using government borrowing rates, to a “model based” view which uses stochastic discount rates. Second, empirical tests focusing on the relationship between primary balances to debt. Third, debt sustainability in the presence of rollover risk. And fourth, whether government borrowing costs below rates of growth (“r

Credibility Of Central Bank Independence Revisited

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Author : Mr.Timo Valila
language : en
Publisher: International Monetary Fund
Release Date : 1999-01-01

Credibility Of Central Bank Independence Revisited written by Mr.Timo Valila and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1999-01-01 with Business & Economics categories.

The specific role of central bank independence in determining the overall credibility of monetary policy is addressed in this paper. It is argued that the credibility of delegating monetary policy to an independent central bank is endogenous to the credibility of the inflation target because a “conservative” inflation target may not be compatible with the fiscal policy stance. Also, lack of transparency in designing the institutional set-up is shown to be welfare-reducing.

Central Bank Credibility And The Expectations Channel

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Author :
language : en
Publisher:
Release Date : 2015

Central Bank Credibility And The Expectations Channel written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.