Testing credibility with time-varying coefficients

Nogueira, Reginaldo Pinto

doi:10.1080/13504850701719611

Cited by 5 publications

(3 citation statements)

References 11 publications

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“…In the wake of the financial crisis of 2008, it has been observed that "monetary policy rules change gradually, pointing to the importance of applying a time-varying estimation framework" (Baxa et al 2014) and that, "by applying the time-varying coefficients method ...it was clear that the past financial crisis caused the central bank to be more expansionary in its policy than usual towards financial stress" (Madsen 2012). Further, analyses of inflation targeting (IT) in "a time-varying coefficients methodology ...show a clear picture of credibility gains from the adoption of IT" (Nogueira 2009). Another application dealt with the recent decoupling of greenhouse gas emissions and gross domestic product in the wake of global warming where it has been found that "the evidence for decoupling among the richer countries gets weaker."…”

Section: Notes On Applicationsmentioning

confidence: 99%

VC: a method for estimating time-varying coefficients in linear models

Schlicht

2021

J. Korean Stat. Soc.

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This paper describes a moments estimator for a standard state-space model with coefficients generated by a random walk. The method calculates the conditional expectations of the coefficients, given the observations. A penalized least squares estimation is linked to the GLS (Aitken) estimates of the corresponding linear model with time-invariant parameters. The estimates are moments estimates. They do not require the disturbances to be Gaussian, but if they are, the estimates are asymptotically equivalent to maximum likelihood estimates. In contrast to Kalman filtering, no specification of an initial state or an initial covariance matrix is required. While the Kalman filter is one sided, the filter proposed here is two sided and therefore uses more of the available information for estimating intermediate states. Further, the proposed filter has a clear descriptive interpretation.

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Section: Notes On Applicationsmentioning

confidence: 99%

VC: a method for estimating time-varying coefficients in linear models

Schlicht

2021

J. Korean Stat. Soc.

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“…Extensive examples of applications of state-space models can be found in Harvey (1989). In particular, studies on monetary policy credibility that use state-space specifications include Nogueira (2009) and Demir and Yigit (2008). 2 See Huang (2001) for an overview on the CAPM and its applications, as well as for a discussion on important issues regarding its possible time variation.…”

Section: Constructing a Time-varying Credibility Indexmentioning

confidence: 99%

“…Extensive examples of applications of state–space models can be found in Harvey (1989). In particular, studies on monetary policy credibility that use state–space specifications include Nogueira (2009) and Demir and Yigit (2008).…”

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confidence: 99%

Credibility in Emerging Economies: Does Inflation Targeting Matter?*

Lanzafame

Nogueira

2011

The Manchester School

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In this paper we evaluate the role of inflation targeting (IT) in enhancing monetary policy credibility in emerging economies. We construct a timevarying credibility index, and then carry out extensive testing in order to assess whether IT had a significant impact on monetary policy credibility. Our results confirm that credibility was on average lower for targeters than non-targeters before the regime change, and show that the gap was closed after the adoption of IT. However, taking mean reversion into account, we find no significant evidence that IT bolstered credibility levels.

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On the Credibility of Inflation-Targeting Regimes in Latin America

Mariscal¹,

Powell²,

Tavella³

2018

eco

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Inflation targeting has been adopted in a set of emerging economies, including eight countries in Latin America. The success of this regime may depend critically on the credibility of the target and the expectation that the authorities will take appropriate actions if the target is breached. This paper exploits a database of inflation expectations and attempts to measure whether, for a set of inflation targeters in Latin America, expectations are well anchored. A tighter anchoring of expectations is interpreted as a gain in credibility. Also considered are the effects on the credibility of the regime if the inflation target is breached. The results indicate that while inflation expectations have not been fully anchored over the whole sample period, credibility has risen, but at the same time the cost of breaching the target has grown.

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Testing credibility with time-varying coefficients

Cited by 5 publications

References 11 publications

VC: a method for estimating time-varying coefficients in linear models

VC: a method for estimating time-varying coefficients in linear models

Credibility in Emerging Economies: Does Inflation Targeting Matter?*

On the Credibility of Inflation-Targeting Regimes in Latin America

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