Central bank credibility not just about legislation – paper
NBER researchers say once independence has been granted, trust still has to be earned
Building a credible policy regime involves more than just the creation of a legally independent central bank, a new paper from the US National Bureau of Economic Research argues.
The authors – Luigi Bocola, Gastón Chaumont, Alessandro Dovis and Rishabh Kirpalani – examine the history of monetary policy in Chile, Colombia and the US.
They find that even though the Central Bank of Colombia’s independence was enshrined into law in 1991, it took until 1999 for its credibility to increase, when it did
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