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"Credibility" in Context: Do Central Bankers and Economists Interpret the Term Differently?

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  • James Forder

Abstract

The idea that the 'credibility' of monetary policy is important receives almost universal assent. But the word can mean very different things in different contexts. In particular, the meaning that it has been given by the work of Robert Barro and David Gordon is a very special one. It should not be presumed that in ordinary discussion of 'credibility' theirs is always the meaning people have in mind. Consequently, Alan Blinder's survey on attitudes to 'credibility', which failed to specify what he meant by the term, might be most misleading, and if unwarranted inferences are not to be drawn a most careful interpretation of it is required.

Suggested Citation

  • James Forder, 2004. ""Credibility" in Context: Do Central Bankers and Economists Interpret the Term Differently?," Econ Journal Watch, Econ Journal Watch, vol. 1(3), pages 413-426, December.
  • Handle: RePEc:ejw:journl:v:1:y:2004:i:3:p:413-426
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    References listed on IDEAS

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    1. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
    2. Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 101-121.
    3. Issing,Otmar & Gaspar,Vitor & Angeloni,Ignazio & Tristani,Oreste, 2001. "Monetary Policy in the Euro Area," Cambridge Books, Cambridge University Press, number 9780521783248, December.
    4. Alan S. Blinder, 2000. "Central-Bank Credibility: Why Do We Care? How Do We Build It?," American Economic Review, American Economic Association, vol. 90(5), pages 1421-1431, December.
    5. David Backus & John Driffill, 1985. "Rational Expectations and Policy Credibility Following a Change in Regime," Review of Economic Studies, Oxford University Press, vol. 52(2), pages 211-221.
    6. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
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    More about this item

    Keywords

    credibility; central bank independence;

    JEL classification:

    • B40 - Schools of Economic Thought and Methodology - - Economic Methodology - - - General
    • 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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