Economics, Econometrics and Finance
8 years ago

Central bank independence fails to lower inflation, reputation may be key.

Econometric Reviews
Policy Credibility and the Design of Central Banks
Rober To Chang, Jerry Dwyer, Adam S. Posen, Mary Rosenbaum

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Central banks face a credibility problem in controlling inflation, leading to the emergence of independence and price stability rules. However, evidence does not strongly support that central bank independence reduces inflation, suggesting reputation may play a role in addressing this issue.