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Monetary Policy Credibility and the Unemployment-Inflation Tradeoff: Some Evidence From 17 Industrial Countries
Author:
Mr. Papa M N'Diaye
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and
Mr. Douglas Laxton
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Series:
IMF Working Papers
Volume/Issue:
Volume 2002: Issue 220
Language:
English
Publication Date:
01 Dec 2002
DOI:
https://doi.org/10.5089/9781451875218.001
ISBN:
9781451875218
ISSN:
1018-5941
Pages:
39
Keywords:
WP; inflation expectation; Phillips Curve; Unemployment; Monetary Policy; Lucas Critique; unemployment gap; unemployment-inflation process; short-run unemployment-inflation trade-off; short-run unemployment inflation trade-off; Inflation; Real interest rates; Long term interest rates; Inflation targeting
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund