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Bopjun Gwak
''Long-term Inflation Expectations and Central Bank Credibility''
( 2020, Vol. 40 No.3 )
This paper proposes a new measure of central bank credibility. I develop an inflation expectations model that specifies inflation expectations' mean-reverting properties, which is assumed to indicate the level of credibility. Estimating the model with US data, I find that the new measure, in general, shows a similar feature of changes in central bank credibility to existing indicators. However, the index in this paper captures the more fundamental changes in credibility. According to the index, central bank credibility in the recent period is maintained at its lowest level since 2017.
Keywords: Inflation Expectations, Inflation Targeting, Central Bank Credibility, Smooth Transition Autoregressive, Regime Switching
JEL: E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit: General
C2 - Single Equation Models; Single Variables: General
Manuscript Received : Apr 26 2020 Manuscript Accepted : Aug 24 2020

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