The Credibility of Monetary Policy Announcements – Empirical Evidence for OECD Countries Since the 1960s

29 Pages Posted: 4 Aug 2012

See all articles by Ansgar Hubertus Belke

Ansgar Hubertus Belke

University of Duisburg-Essen - Department of Economics and Business Administration; IZA Institute of Labor Economics; Centre for European Policy Studies

Andreas Freytag

University of Jena - Department of Economics

Jonas Keil

affiliation not provided to SSRN

Friedrich Schneider

Johannes Kepler University Linz - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Institute for the Study of Labor (IZA)

Multiple version iconThere are 2 versions of this paper

Date Written: July 2, 2012

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.

Keywords: Credibility, central bank independence, price stability, monetary commitment

JEL Classification: E31, E50, E52

Suggested Citation

Belke, Ansgar Hubertus and Freytag, Andreas and Keil, Jonas and Schneider, Friedrich G., The Credibility of Monetary Policy Announcements – Empirical Evidence for OECD Countries Since the 1960s (July 2, 2012). Ruhr Economic Paper No. 355, Available at SSRN: https://ssrn.com/abstract=2123098 or http://dx.doi.org/10.2139/ssrn.2123098

Ansgar Hubertus Belke (Contact Author)

University of Duisburg-Essen - Department of Economics and Business Administration ( email )

Universitätsstr. 9
Essen, 45141
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Centre for European Policy Studies ( email )

1 Place du Congres, 1000
Brussels, 1000
Belgium

Andreas Freytag

University of Jena - Department of Economics ( email )

Carl-Zeiss-Str. 3
07743 Jena
Germany

Jonas Keil

affiliation not provided to SSRN ( email )

Friedrich G. Schneider

Johannes Kepler University Linz - Department of Economics ( email )

Altenbergerstrasse 69
A-4040 Linz, 4040
Austria
+43 732 2468 8210 (Phone)
+43 732 2468 8208 (Fax)

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

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Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Institute for the Study of Labor (IZA)

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Bonn, D-53072
Germany

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