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Importance of credibility for business confidence: evidence from an emerging economy

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  • Helder Ferreira Mendonça

    (Fluminense Federal University)

  • André Filipe Guedes Almeida

    (Brazilian Institute of Geography and Statistics)

Abstract

This study investigates the main factors affecting the confidence of the entrepreneur and, in particular, the effect caused by the credibility of monetary policy. We estimate the effect of credibility on business confidence by using two alternative measures of ability of the Brazilian central bank to meet the policy targets. The findings indicate that the credibility of the monetary policy can reduce uncertainty level in the economy, thus permitting an improvement for the entrepreneurs in their decision making. Furthermore, the results indicate that an increase in the institutional instability can bring a deterioration in the business confidence.

Suggested Citation

  • Helder Ferreira Mendonça & André Filipe Guedes Almeida, 2019. "Importance of credibility for business confidence: evidence from an emerging economy," Empirical Economics, Springer, vol. 57(6), pages 1979-1996, December.
    • Handle: RePEc:spr:empeco:v:57:y:2019:i:6:d:10.1007_s00181-018-1533-5
    DOI: 10.1007/s00181-018-1533-5
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    Cited by:

    1. Helder Ferreira de Mendonça & Eduardo Schirmer Finn, 2022. "Can credibility offset electricity price effect on business confidence? An empirical investigation from a large emerging economy," Applied Economics, Taylor & Francis Journals, vol. 54(11), pages 1229-1242, March.
    2. Oluwasegun B. Adekoya & Johnson A. Oliyide, 2021. "Business confidence as a strong tracker of future growth: is it driven by economic policy uncertainty and oil price shocks in the OECD countries?," Future Business Journal, Springer, vol. 7(1), pages 1-13, December.
    3. Marcin Olkiewicz, 2022. "The Impact of Economic Indicators on the Evolution of Business Confidence during the COVID-19 Pandemic Period," Sustainability, MDPI, vol. 14(9), pages 1-17, April.
    4. Helder Ferreira de Mendonça & Vítor Ribeiro Laufer Calafate, 2021. "Lack of fiscal transparency and economic growth expectations: an empirical assessment from a large emerging economy," Empirical Economics, Springer, vol. 61(6), pages 2985-3027, December.
    5. André Filipe Guedes Almeida & Gabriel Caldas Montes, 2020. "Effects of crime and violence on business confidence: evidence from Rio de Janeiro," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 47(7), pages 1669-1688, May.
    6. de Mendonça, Helder Ferreira & Garcia, Pedro Mendes, 2023. "Effects of oil shocks and central bank credibility on price diffusion," International Review of Economics & Finance, Elsevier, vol. 84(C), pages 304-317.

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    More about this item

    Keywords

    Credibility; Business confidence; Expectations; Institutional instability;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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