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Credibility of Monetary Policy in Four Accession Countries: A Markov Regime-Switching Approach

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Philip Arestis
Kostas Mouratidis

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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.

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Paper provided by Levy Economics Institute, The in its series Economics Working Paper Archive with number 371.

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Date of creation: Feb 2003
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Handle: RePEc:lev:wrkpap:371

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  2. Hansen, Bruce E, 1992. "The Likelihood Ratio Test under Nonstandard Conditions: Testing the Markov Switching Model of GNP," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(S), pages S61-82, Suppl. De. [Downloadable!] (restricted)
  3. Drazen, Allan & Masson, Paul R, 1994. "Credibility of Policies versus Credibility of Policymakers," The Quarterly Journal of Economics, MIT Press, vol. 109(3), pages 735-54, August. [Downloadable!] (restricted)
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  4. Lamoureux, Christopher G & Lastrapes, William D, 1990. "Persistence in Variance, Structural Change, and the GARCH Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(2), pages 225-34, April.
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  6. Dahlquist, Magnus & Gray, Stephen F., 2000. "Regime-switching and interest rates in the European monetary system," Journal of International Economics, Elsevier, vol. 50(2), pages 399-419, April. [Downloadable!] (restricted)
  7. Caporale, Guglielmo Maria & Kalyvitis, Sarantis & Pittis, Nikitas, 1996. "Interest rate convergence, capital controls, risk premia and foreign exchange market efficiency in the EMS," Journal of Macroeconomics, Elsevier, vol. 18(4), pages 693-714. [Downloadable!] (restricted)
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  9. Durlauf, Steven N, 1991. "Multiple Equilibria and Persistence in Aggregate Fluctuations," American Economic Review, American Economic Association, vol. 81(2), pages 70-74, May. [Downloadable!] (restricted)
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  10. Benjamin M. Friedman & David I. Laibson, 1989. "Economic Implications of Extraordinary Movements in Stock Prices," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1989-2), pages 137-190. [Downloadable!]
  11. Andrew Ang & Geert Bekaert, 1998. "Regime Switches in Interest Rates," NBER Working Papers 6508, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Fountas, Stilianos & Papagapitos, Agapitos, 1997. "Policy Credibility in the ERM: Evidence from Six Countries Using an ARCH Approach," Applied Economics, Taylor and Francis Journals, vol. 29(5), pages 627-37, May. [Downloadable!] (restricted)
  13. Kenneth A. Froot & Kenneth Rogoff, 1991. "The EMS, the EMU, and the Transition to a Common Currency," NBER Working Papers 3684, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  14. Howitt, Peter & McAfee, R Preston, 1992. "Animal Spirits," American Economic Review, American Economic Association, vol. 82(3), pages 493-507, June. [Downloadable!] (restricted)
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  15. Jeanne, Olivier, 1997. "Are currency crises self-fulfilling?: A test," Journal of International Economics, Elsevier, vol. 43(3-4), pages 263-286, November. [Downloadable!] (restricted)
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  1. M. Frömmel, 2007. "Volatility Regimes in Central and Eastern European Countries’ Exchange Rates," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 07/487, Ghent University, Faculty of Economics and Business Administration. [Downloadable!]
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