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Endogenous Monetary Policy Credibility in Ukraine

Author

Listed:
  • Kateryna Savolchuk

    (National Bank of Ukraine)

  • Anton Grui

    (National Bank of Ukraine)

Abstract

In this paper, authors introduce endogenous monetary policy credibility into a semi-structural New Keynesian model. The model is estimated based on data for Ukraine, which de facto adopted inflation-targeting at the end of 2015. Authors model credibility as a nonlinear function of two gaps – actual and expected deviations of inflation from its target. Credibility is asymmetric as above-target inflation reduces it more than below-target. Authors show how low policy credibility can make economic stabilization more costly, and expansionary policy – counterproductive. It can also generate the price puzzle. Furthermore, we estimate the historical path of monetary policy credibility in Ukraine.

Suggested Citation

  • Kateryna Savolchuk & Anton Grui, 2022. "Endogenous Monetary Policy Credibility in Ukraine," Working Papers 02/2022, National Bank of Ukraine.
    • Handle: RePEc:ukb:wpaper:02/2022
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    File URL: https://bank.gov.ua/admin_uploads/article/WP_2022-02_Savolchuk_Grui_eng.pdf
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    More about this item

    Keywords

    New Keynesian model; monetary policy credibility; inflation expectations;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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