What Determines the Credibility of the Central Bank of Israel in the Public Eye
International Journal of Central Banking, Forthcoming
37 Pages Posted: 10 Jun 2013 Last revised: 15 Dec 2014
Date Written: December 15, 2014
In line with the rational expectations' approach, economists emphasize transparency as a key factor for Central Banks' credibility. In this paper, a psychological approach yields different results: trust in the Banks' policy is associated with the professionalism and independence of the Bank and not with its transparency. It is a subtle difference, because transparency is indeed a positive factor in the overall image of the Bank, but a statistical analysis shows that not all aspects of the positive image are relevant to trust in the Bank's inflationary policy.
Keywords: Credibility, Transparency, Inflation Expectations, Central Bank
JEL Classification: E58
Suggested Citation: Suggested Citation