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Monetary policy credibility and inflationary expectation

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  • Yuxiang, Karl
  • Chen, Zhongchang

Abstract

Since there are significant biases in the individuals' inflationary expectations, the role of monetary policy credibility needs to be reconsidered. Theoretically, policy credibility can influence the policymaker's plan of action or reflect his preference. Thus, when prices rise, perceived credibility not only stabilizes public expectations of inflation, but also becomes important information, which can be used by the individuals to improve their expectations. The econometric analysis of a large-scale survey largely confirms these theoretical predictions. The perceived policy credibility as well as inflation perceptions and education plays an important role in the individuals' inflationary expectations.

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  • Yuxiang, Karl & Chen, Zhongchang, 2010. "Monetary policy credibility and inflationary expectation," Journal of Economic Psychology, Elsevier, vol. 31(4), pages 487-497, August.
    • Handle: RePEc:eee:joepsy:v:31:y:2010:i:4:p:487-497
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    Cited by:

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    4. Moradbeigi, Maryam & Law, Siong Hook, 2017. "The role of financial development in the oil-growth nexus," Resources Policy, Elsevier, vol. 53(C), pages 164-172.
    5. Hadj, Tarek Bel & Ghodbane, Adel, 2021. "Do natural resources rents and institutional development matter for financial development under quantile regression approach?," Resources Policy, Elsevier, vol. 73(C).

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