Monetary Policy Credibility and the Unemployment-Inflation Trade-Off: Some Evidence from 17 Industrial Countries

40 Pages Posted: 12 Feb 2006

See all articles by Douglas Laxton

Douglas Laxton

International Monetary Fund (IMF) - Research Department

Papa N'Diaye

International Monetary Fund (IMF) - Asia and Pacific Department

Date Written: December 2002

Abstract

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.

Keywords: Phillips Curve, Unemployment, Monetary Policy, Lucas Critique

JEL Classification: C51, E31, E52

Suggested Citation

Laxton, Douglas and N'Diaye, Papa, Monetary Policy Credibility and the Unemployment-Inflation Trade-Off: Some Evidence from 17 Industrial Countries (December 2002). IMF Working Paper No. 02/220, Available at SSRN: https://ssrn.com/abstract=880908

Douglas Laxton (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Papa N'Diaye

International Monetary Fund (IMF) - Asia and Pacific Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
298
Abstract Views
2,375
Rank
186,229
PlumX Metrics