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The NBU's Credibility in the Formation of Firms' Inflation Expectations

Author

Listed:
  • Kateryna Savolchuk

    (National Bank of Ukraine)

  • Tetiana Yukhymenko

    (National Bank of Ukraine)

Abstract

This study investigates the influence of central bank credibility in forming inflation expectations, using data obtained from business surveys conducted by the National Bank of Ukraine. We employ a two-stage treatment model to mitigate the potential bias of the endogeneity of firms' answers. The results confirm the vital role of credibility in shaping inflation expectations. Notably, credibility reduces sensitivity to past inflation deviations. Robustness checks, which are based on bootstrapping, reinforce the reliability of the findings. Our study underscores the importance of central bank credibility in anchoring inflation expectations.

Suggested Citation

  • Kateryna Savolchuk & Tetiana Yukhymenko, 2023. "The NBU's Credibility in the Formation of Firms' Inflation Expectations," Working Papers 04/2023, National Bank of Ukraine.
    • Handle: RePEc:ukb:wpaper:04/2023
    as

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    File URL: https://bank.gov.ua/admin_uploads/article/WP_2023-04_Savolchuk_Yukhymenko.pdf
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    References listed on IDEAS

    as
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    5. Joshua Angrist & Alan Krueger, 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments," Working Papers 834, Princeton University, Department of Economics, Industrial Relations Section..
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    credibility; inflation expectations; endogeneity; surveys;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E70 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - General

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