Central Bank credibility and inflation expectations: a microfounded forecasting approach
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Credibility is elusive and no generally agreed upon measure of it exists. Despite that, Blinder (2000) generated a consensus in the literature by arguing that ”A central bank is credible if people believe it will do what it says”. It is very hard to argue against such a definition of credibility, being the reason why it became so popular among central bankers and academics alike.