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Can Central Bank Credibility Improve Monetary Policy? A Meta‐Analysis

Author

Listed:
  • Valentina Cepeda
  • Bibiana Taboada
  • Mauricio Villamizar‐Villegas

Abstract

We bring together the largest meta‐analysis ever conducted in the macroeconomic literature to investigate the effects of central bank credibility on monetary policy. With nearly 1200 surveyed effects, we first confirm that (i) conventional policy significantly affects inflation and output, and (ii) unconventional policy significantly affects capital flows and the exchange rate. We next evaluate whether different measures of credibility amplify these effects. Our findings indicate that central bank transparency has the largest payoff, as it increases policy effectiveness by 69% when dealing with foreign exchange intervention, by 59% when dealing with capital inflows, and by 14% when dealing with conventional policy. An alternative credibility measure, medium and long‐term anchoring in inflation expectations, is the runner‐up, increasing effectiveness by 31%, 9% and 10%, respectively. Other measures, such as central bank independence and short‐term anchoring in inflation expectations, have lower and in some cases null incremental effects.

Suggested Citation

  • Valentina Cepeda & Bibiana Taboada & Mauricio Villamizar‐Villegas, 2025. "Can Central Bank Credibility Improve Monetary Policy? A Meta‐Analysis," International Finance, Wiley Blackwell, vol. 28(2), pages 115-140, July.
    • Handle: RePEc:bla:intfin:v:28:y:2025:i:2:p:115-140
    DOI: 10.1111/infi.70000
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    Cited by:

    1. Ricardo Alonzo Fern'andez Salguero, 2025. "The Crisis Simulator for Bolivia (KISr-p): An Empirically Grounded Modeling Framework," Papers 2510.16537, arXiv.org.
    2. Juan J. Ospina-Tejeiro & José Vicente Romero, 2024. "Monetary policy transparency in Colombia," Borradores de Economia 1285, Banco de la Republica de Colombia.
    3. Ricardo Alonzo Fernandez Salguero, 2025. "An Analysis of Monetary Policy Evidence and Theory through Meta-Analyses," Papers 2509.19591, arXiv.org.
    4. Salguero, Ricardo Alonzo Fernandez, 2025. "Un análisis de la evidencia y teoría de la política monetaria a través de los meta-análisis," SocArXiv 9sypa_v1, Center for Open Science.

    More about this item

    JEL classification:

    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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