IDEAS home Printed from https://ideas.repec.org/a/adx/jessjr/v4y2023i3p568-577.html
   My bibliography  Save this article

Anchoring Inflation Expectations in Selected Asian Countries: The Role of Monetary Policy Credibility

Author

Listed:
  • Khaliq ul Rehman
  • Ghulam Ghouse

Abstract

Inflation targeting has become a widespread monetary policy framework in many developing countries, and this approach to achieving its goals depends on the level of trust in the central bank. As the central bank's credibility grows, it gains a greater ability to shape the public's expectations regarding inflation. The public adjusts their expectations about future inflation based on the central bank's declared targets. Still, this adjustment depends on their belief in the central bank's capacity to achieve those objectives. Credibility plays a crucial role in disconnecting these expectations from past trends, enabling them to be formed in a forward-looking manner. This study aims to examine the credibility of monetary policy and inflation in the case of selected South Asian countries like Pakistan, India, Sri Lanka, and Bangladesh. The quarterly data are used from 1990Q1 to 2021Q4, but it little bit varies from country to country. The Credibility Index (CI) is used to measure the credibility of monetary policy. The Quantile Regression (QR) is employed to test the impact of monetary policy credibility on inflation. The results indicate that all the variables are stationary at the same level and have dynamic correlations across quartiles and countries. The results from the regression analysis show that the credibility of monetary policy has a negative impact on the inflation rate. This research enhances the understanding of the vital link between credibility and monetary policy effectiveness in developing economies.

Suggested Citation

  • Khaliq ul Rehman & Ghulam Ghouse, 2023. "Anchoring Inflation Expectations in Selected Asian Countries: The Role of Monetary Policy Credibility," Journal of Education and Social Studies, Science Impact Publishers, vol. 4(3), pages 568-577.
  • Handle: RePEc:adx:jessjr:v:4:y:2023:i:3:p:568-577
    as

    Download full text from publisher

    File URL: https://www.scienceimpactpub.com/journals/index.php/jess/article/view/696/389
    Download Restriction: no
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:adx:jessjr:v:4:y:2023:i:3:p:568-577. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dr. Shahbaz Ahmad (email available below). General contact details of provider: https://www.scienceimpactpub.com/journals/index.php .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.