Abstract
We create two credibility variables, one depending on the correspondence between the Fed forecast of inflation and the private sector's forecast, the other between the Fed forecast and actual inflation. These are measures of credibility in terms of whether the public believes that the Fed will carry out its announced policy and whether the policy will have the effect claimed by the Fed. We find that credibility was surprisingly high in the late 1970s. The Fed's change in regime led to little change in credibility. The credibility variables help reduce the forecast errors of the Phillips curve in the early 1980s.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
