The ex ante credibility of disinflation policy and the cost of reducing inflation

Boschen, John F.; Weise, Charles L.

doi:10.1016/s0164-0704(01)00167-7

Cited by 22 publications

(37 citation statements)

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“…In fact, there is no specification where the legal measures were significantly associated with the probability of a start of a disinflation. A similar result was found by Boschen and Weise (2001) in a sample of 19 OECD countries in the 1960-1993 period. In their results, the legal independence index did not seem to have any effect on the probability of a start of a disinflation.…”

supporting

confidence: 84%

“…Finally, Boschen and Weise (2001) found no significant relationship between legal independence measures and the probability of the start of a disinflation when inflation was rising for a sample of 19 OECD countries for the period 1960-…”

mentioning

confidence: 85%

“…The empirical strategy follows Boschen and Weise (2001), by using a measure of credibility estimated as the probability of the start of a successful disinflation induced by the central bank.…”

Section: Empirical Strategymentioning

confidence: 99%

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Breaking Credibility in Monetary Policy: The Role of Politics in the Stability of the Central Banker

Rueda

2008

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The views and interpretations in this document are those of the authors and should not be attributed to the Inter-American Development Bank, or to any individual acting on its behalf. This paper may be freely reproduced provided credit is given to the Research Department, InterAmerican Development Bank. Terms of use: Documents inThe Research Department (RES) produces a quarterly newsletter, IDEA (Ideas for Development in the Americas), as well as working papers and books on diverse economic issues. To obtain a complete list of RES publications, and read or download them please visit our web site at: http://www.iadb.org/res. 3 Abstract * This paper studies the relationship between the hazard rate of the exit of a president of a central bank and a measure of credibility in monetary policy. The expected hazard rate of exit is estimated as a function of legal and political variables. The measure of credibility is the expected probability of a disinflation beginning when inflation is rising. For a sample of 22 Latin American and G7 countries, I find a negative relationship between the hazard rate of exit and the measure of credibility. This provides evidence of the expected relationship between independence and credibility not found in previous cross country studies. Using the executive's party ideology as a measure of aversion to inflation, there was no evidence that this relationship is different for countries where the government is identified as more conservative. However, when a president of the central bank appointed by a conservative government is in office, a rise in the probability of a disinflation beginning when inflation was rising was found. The results show that legal independence after controlling for the hazard rate of the president's exit is not associated with credibility gains.

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confidence: 84%

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confidence: 85%

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Breaking Credibility in Monetary Policy: The Role of Politics in the Stability of the Central Banker

Rueda

2008

SSRN Journal

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“…A possible reason for the exchange rate regime being less important in inducing a correlation 1 8 Bernanke et al (1999) and Boschen and Weise (2001) compute sacri…ce ratios using more recent vintages of data than Ball (1994) and also note small di¤erences in the exact dates for disin ‡ation episodes and the magnitudes of the sacri…ce ratios when compared to those in Ball (1994). 1 9 The coe¢ cient for openness increases substantially when using sacri…ce ratios from the post-1980 period.…”

Section: Len Gt H Is the Disin ‡Ation Length In Yearsmentioning

confidence: 99%

Openness, exchange rate regimes and the Phillips curve

Bowdler

2009

Journal of International Money and Finance

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A number of theoretical models predict that the slope of the Phillips curve increases with trade openness, but cross-country studies provide little evidence for such a correlation. We highlight two reasons for this …nding. Firstly, the strength of the relationship may depend on the extent of exchange rate adjustment, which is a potential determinant of output and in ‡ation dynamics in open economies, but previous studies have not made a distinction between …xed and ‡oating exchange rate regimes.Secondly, existing estimates of the Phillips curve slope are based on data from the 1950s through the 1980s, and are therefore likely a¤ected by price and wage controls, in ‡ationary oil price hikes and the role played by …scal policy in driving output and in ‡ation (the underlying theory requires that monetary shocks dominate). We calculate new measures of the Phillips curve slope using data from 1981-98, a period during which these factors were arguably less important. Regressions based on the new measures indicate that the Phillips curve slope increases with trade openness amongst countries maintaining ‡exible and semi- ‡exible exchange rate regimes, but is unrelated to openness amongst countries maintaining …xed exchange rate regimes.

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“…He assumes that trend output grows log-linearly following the initial deviation until it returns to its potential trend value. Many economists have followed Ball's "Standard Method," including Jordan (1997), Partow and Yuravlivker (1998), Junguito (1998), Bernanke, Laubach, Mishkin, and Posen (1999), and Boschen and Weise (1999).…”

Section: Introductionmentioning

confidence: 99%

Sacrifice Ratios with Long-Lived Effects*

Zhang

2005

Int Finance

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractThis paper contains a theoretical and empirical study of sacrifice ratios with long-lived effects, including possible strong persistence effects, or even hysteresis effects. The empirical analysis is based on G-7 quarterly output data as well as unemployment data from 1960 to 1999. In this paper, I develop some new methods to measure sacrifice ratios with long-lived effects. I reach four conclusions: First, sacrifice ratios with long-lived effects are larger than sacrifice ratios that do not account for long-lived effects. Second, from a theoretical model and simulation, the "standard method" of measuring sacrifice ratios by Ball (1994) has a larger downward bias for countries with larger long-lived effects. Third, both random and fixed effect models show that there is a negative relationship between sacrifice ratios and initial inflations, which can provide one explanation of the large magnitude of sacrifice ratios with long-lived effects in the 1990s, compared with other periods. Fourth, there is no significant negative relationship between sacrifice ratios with long-lived effects and nominal wage rigidities.

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The ex ante credibility of disinflation policy and the cost of reducing inflation

Cited by 22 publications

References 13 publications

Breaking Credibility in Monetary Policy: The Role of Politics in the Stability of the Central Banker

Breaking Credibility in Monetary Policy: The Role of Politics in the Stability of the Central Banker

Openness, exchange rate regimes and the Phillips curve

Sacrifice Ratios with Long-Lived Effects*

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