Testing for Credibility Effects
38 Pages Posted: 15 Feb 2006
Date Written: November 1991
Abstract
This paper examines some recent techniques designed to draw inferences about the credibility of changes in macroeconomic policy regimes. An alternative two-step approach, based on the decomposition between permanent and transitory components of a "credibility variable" is proposed. The methodology is then used to test for the existence of a credibility effect in the Cruzado stabilization plan implemented in Brazil in 1986.
JEL Classification: C4, E3, E6
Suggested Citation: Suggested Citation
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