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

See all articles by Philip Arestis

Philip Arestis

University of Cambridge - Department of Land Economy; Universidad del País Vasco (UPV/EHU)

Konstantinos Mouratidis

National Institute of Economic and Social Research (NIESR)

Date Written: February 2003

Abstract

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

Arestis, Philip and Mouratidis, Konstantinos, Credibility of Monetary Policy in Four Accession Countries: A Markov Regime-Switching Approach (February 2003). Levy Economics Institute Working Paper No. 371. Available at SSRN: https://ssrn.com/abstract=382421 or http://dx.doi.org/10.2139/ssrn.382421

Philip Arestis (Contact Author)

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

Universidad del País Vasco (UPV/EHU)

Barrio Sarriena s/n
Leioa, Bizkaia 48940
Spain

Konstantinos Mouratidis

National Institute of Economic and Social Research (NIESR) ( email )

2 Dean Trench Street
Smith Square
London SW1P 3HE
United Kingdom

HOME PAGE: http://www.niesr.ac.uk/STAFFBIO/KMourati.htm

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