|
| |
| Marcelo de C. Griebeler and Guilherme Stein |
| |
| ''Credibility is not enough: the importance of common knowledge to anchor expectations'' |
| ( 2018, Vol. 38 No.2 ) |
| |
| |
| In a linear model, we show that when individuals form their inflation expectations taking into account the others' expectations, credibility - defined as the individual belief that the central bank is speaking the truth and has enough technical capacity to achieve the announced targets - is not sufficient to anchor the aggregate expectations. Instead, we show that it is necessary to add common knowledge of the individual credibility in order to guarantee anchoring. |
| |
| |
| Keywords: inflation expectations; credibility; common knowledge. |
JEL: E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit: General
E4 - Money and Interest Rates: General |
| |
| Manuscript Received : Jan 03 2018 | | Manuscript Accepted : Apr 30 2018 |
|
