Credibility of Monetary Policy in Four Accession Countries: A Markov Regime-Switching Approach
Levy Economics Institute Working Paper No. 371
17 Pages Posted: 7 Apr 2003
Date Written: February 2003
The aim of this study is to estimate the credibility of monetary policy in four accession countries (the Czech Republic, Hungary, Poland, and the Slovak Republic), based on the Markov regime-switching (MRS) framework. We utilize the theoretical proposition that in the conduct of monetary policy, there is uncertainty in terms of the type of central bank. We measure this uncertainty as a deviation of monetary policy from a target level. We utilize for the target level the differential between the interest rates of the four individual accession countries and a "synthetic" interest rate of 11 EMU member countries.
Keywords: monetary policy, credibility, Markov regime-switching
JEL Classification: C5, E5
Suggested Citation: Suggested Citation