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Credibility of monetary policy in four accession countries: a Markov regime‐switching approach
Author(s) -
Arestis Philip,
Mouratidis Kostas
Publication year - 2005
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.260
Subject(s) - accession , monetary policy , czech , economics , credibility , markov chain , interest rate , inflation targeting , monetary economics , international economics , exchange rate , differential (mechanical device) , macroeconomics , econometrics , european union , political science , linguistics , philosophy , engineering , machine learning , law , computer science , aerospace engineering
The aim of this study is to estimate the credibility of monetary policy in four accession countries (the Czech Republic, Hungary, Poland and the Slovak Republic), based on the Markov regime‐switching (MRS) framework. We utilize the theoretical proposition that in the conduct of monetary policy, there is uncertainty in terms of the type of central bank. We measure this uncertainty as a deviation of monetary policy from a target level. We utilize for the target level the differential between the interest rates of the four individual accession countries and a ‘synthetic’ interest rate of 11 EMU member countries. Copyright © 2005 John Wiley & Sons, Ltd.