Central Bank Credibility: Why Do We Care? How Do We Build it?

25 Pages Posted: 17 Aug 1999 Last revised: 28 Jul 2022

See all articles by Alan S. Blinder

Alan S. Blinder

Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: June 1999

Abstract

Central bank credibility plays a pivotal role in much of the modern literature on monetary policy, yet it is difficult to measure or even assess objectively. A survey of central bankers was conducted to determine their attitudes on two important issues: why credibility matters, and how credibility can be built. The central bankers' answers are compared with the responses of NBER-affiliated macro and monetary economists. The two groups agree much more than they disagree. They are particularly united in their evaluations of ways to make a central bank credible -- assigning high ratings to the central bank's track record and low ratings to theoretical ideas like precommitment and incentive-compatible contracts.

Suggested Citation

Blinder, Alan S., Central Bank Credibility: Why Do We Care? How Do We Build it? (June 1999). NBER Working Paper No. w7161, Available at SSRN: https://ssrn.com/abstract=171558

Alan S. Blinder (Contact Author)

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

National Bureau of Economic Research (NBER)

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