Belke, Ansgar; Freytag, Andreas; Keil, Jonas; Schneider, Friedrich:

The Credibility of Monetary Policy Announcements: Empirical Evidence for OECD Countries since the 1960s

In: DIW Diskussionspapiere = Discussion Papers / Deutsches Institut für Wirtschaftsforschung, (2012) ; Nr. 1225, S. 1-23
ISSN: 1433-0210
Zeitschriftenaufsatz / Fach: Wirtschaftswissenschaften
Fakultät für Wirtschaftswissenschaften » Fachgebiet Volkswirtschaftslehre » Makroökonomik
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