Central Bank Credibility before and after the Crisis

Michael D. Bordo, Pierre L. Siklos

Research output: Contribution to journalArticle

3 Scopus citations


A new measure of credibility is constructed as a function of the differential between observed inflation and some estimate of the inflation rate that the central bank targets. The target is assumed to be met flexibly. Credibility is calculated for a large group of both advanced and emerging countries from 1980 to 2014. Financial crises reduce central bank credibility and central banks with strong institutional feaures tend to do better when hit by a shock of the magnitude of the 2007-2008 financial crisis. The VIX, adopting an inflation target and central bank transparency, are the most reliable determinants of credibility. Similarly, real economic growth has a significant influence on central bank credibility even in inflation targeting economies.

Original languageEnglish (US)
Pages (from-to)19-45
Number of pages27
JournalOpen Economies Review
Issue number1
StatePublished - Feb 1 2017

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics


  • Central banking institution
  • Interest rate targeting
  • Monetary policy credibility
  • Money growth targeting
  • Non-linearity and asymmetry in monetary policy

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