Monetary Policy Credibility and the Unemployment-Inflation Tradeoff: Some Evidence From 17 Industrial Countries
December 1, 2002
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Summary
Using data on long-term interest rates for 17 industrial countries, this paper develops some simple measures of monetary policy credibility and then tests if such measures improve the out-of-sample forecasts of conventional models of the inflation-unemployment process. The results provide some evidence in favor of the Lucas critique by showing that the short-run unemployment-inflation trade-off tends to improve in countries that are successful in providing low and stable inflation.
Subject: Financial services, Inflation, Inflation targeting, Labor, Long term interest rates, Monetary policy, Prices, Real interest rates, Unemployment
Keywords: Inflation, inflation expectation, Inflation targeting, Long term interest rates, Lucas Critique, Monetary Policy, Phillips Curve, Real interest rates, short-run unemployment inflation trade-off, short-run unemployment-inflation trade-off, Unemployment, unemployment gap, unemployment-inflation process, WP
Pages:
39
Volume:
2002
DOI:
Issue:
220
Series:
Working Paper No. 2002/220
Stock No:
WPIEA2202002
ISBN:
9781451875218
ISSN:
1018-5941
