Title of article :
Fiscal Determinants of Central Bank Credibility: Evidence on Inflation- Targeting Economies
Author/Authors :
Kamal ، Elham Faculty of Economics and Administrative Sciences - University of Mazandaran , Taghinejadomran ، Vahid Faculty of Economics and Administrative Sciences - University of Mazandaran
From page :
441
To page :
472
Abstract :
This paper studies the main fiscal determinants of central bank credibility (CBC) from 1990 to 2014. Covering 25 inflation-targeting (IT) economies, we have mainly focused on sovereign debt holders and fiscal rules since adopting the IT framework. As the CBC indicator is highly concentrated in the right tail of the distribution, the mean-based approaches are incapable of unearthing the fact that the effect of fiscal factors may be asymmetric across the distribution of the credibility index. In departing from the problem, we use a quantile regression method to estimate parameters over the entire conditional distribution of CBC. The asymmetric response using the quantile regression is state-dependent and conditional on the credibility distribution. Having provided a comprehensive survey on the fiscal factors potentially related to the credibility in the literature, we find that fiscal rules are almost prominent at the lower quantiles while debt holders composition is strongly significant at the upper tails of CBC distribution. These findings are further supported by the slope equality tests, discussed in Koenker Bassett (1982). These results could be attributed to the more sensitivity of the private sector expectations to the debt holders’ composition. Therefore, central bankers could reduce public expectations by taking into account the non-linear impact of fiscal factors on their credibility.
Keywords :
Central Bank Credibility , Inflation , Targeting Framework , Fiscal Determinants , Quantile Regression
Journal title :
Iranian Journal of Economic Studies
Journal title :
Iranian Journal of Economic Studies
Record number :
2740446
Link To Document :
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