Central Bank Credibility, Reputation and Inflation Targeting in Historical Perspective

98 Pages Posted: 24 Nov 2014

See all articles by Michael D. Bordo

Michael D. Bordo

Rutgers University, New Brunswick - Department of Economics; National Bureau of Economic Research (NBER)

Pierre L. Siklos

Wilfrid Laurier University - School of Business & Economics; Balsillie school of international affairs

Date Written: November 2014

Abstract

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.

Suggested Citation

Bordo, Michael D. and Siklos, Pierre L., Central Bank Credibility, Reputation and Inflation Targeting in Historical Perspective (November 2014). NBER Working Paper No. w20693. Available at SSRN: https://ssrn.com/abstract=2529846

Michael D. Bordo (Contact Author)

Rutgers University, New Brunswick - Department of Economics ( email )

New Brunswick, NJ
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Pierre L. Siklos

Wilfrid Laurier University - School of Business & Economics ( email )

Department of Economics
75 University Avenue W.
Waterloo, Ontario N2L 3C5
Canada
519-884-0710 Ext.. 3491 (Phone)

HOME PAGE: http://pierrelsiklos.com

Balsillie school of international affairs ( email )

67 Erb Street West
Waterloo, ON N2L 6C2
Canada

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