The Theory of Credibility and the Reputation-Bias of Policy.
The theory of policy credibility has been influential in both the design of monetary policymaking institutions and in the implementation of policy. In particular, the idea that 'reputation' is important has been widely accepted. However, careful attention to the assumptions and implication...
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| Format: | Journal article |
| Language: | English |
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Taylor and Francis
2001
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| _version_ | 1826257713482432512 |
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| author | Forder, J |
| author_facet | Forder, J |
| author_sort | Forder, J |
| collection | OXFORD |
| description | The theory of policy credibility has been influential in both the design of monetary policymaking institutions and in the implementation of policy. In particular, the idea that 'reputation' is important has been widely accepted. However, careful attention to the assumptions and implications of the theory reveals many sources of doubt as to its empirical value. First, the theory is implausible and, even if taken seriously, does not point to many of the conclusions frequently supposed to be based on it. Second, evidence suggests the theory is false. Third, even policymakers who profess themselves concerned about the maintenance of credibility do not behave consistently in the way the theory says they should. Although many policy proposals ostensibly based on the theory of credibility therefore seem to lack persuasive support, the idea of credibility still poses a danger to effective policymaking since it creates motives for excessively contractionary policy. Although it is frequently asserted that monetary policy can have no long-term effects on economic performance, the idea that a loss of 'reputation' will have lasting detrimental effects appears to motivate much policy. In the absence of convincing arguments that reputation - in its technical sense - is important, this would seem to be undesirable and probably dangerous. |
| first_indexed | 2024-03-06T18:22:32Z |
| format | Journal article |
| id | oxford-uuid:06ca41ae-9f75-48b5-b77e-2c07779afed1 |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-06T18:22:32Z |
| publishDate | 2001 |
| publisher | Taylor and Francis |
| record_format | dspace |
| spelling | oxford-uuid:06ca41ae-9f75-48b5-b77e-2c07779afed12022-03-26T09:04:15ZThe Theory of Credibility and the Reputation-Bias of Policy.Journal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:06ca41ae-9f75-48b5-b77e-2c07779afed1EnglishDepartment of Economics - ePrintsTaylor and Francis2001Forder, JThe theory of policy credibility has been influential in both the design of monetary policymaking institutions and in the implementation of policy. In particular, the idea that 'reputation' is important has been widely accepted. However, careful attention to the assumptions and implications of the theory reveals many sources of doubt as to its empirical value. First, the theory is implausible and, even if taken seriously, does not point to many of the conclusions frequently supposed to be based on it. Second, evidence suggests the theory is false. Third, even policymakers who profess themselves concerned about the maintenance of credibility do not behave consistently in the way the theory says they should. Although many policy proposals ostensibly based on the theory of credibility therefore seem to lack persuasive support, the idea of credibility still poses a danger to effective policymaking since it creates motives for excessively contractionary policy. Although it is frequently asserted that monetary policy can have no long-term effects on economic performance, the idea that a loss of 'reputation' will have lasting detrimental effects appears to motivate much policy. In the absence of convincing arguments that reputation - in its technical sense - is important, this would seem to be undesirable and probably dangerous. |
| spellingShingle | Forder, J The Theory of Credibility and the Reputation-Bias of Policy. |
| title | The Theory of Credibility and the Reputation-Bias of Policy. |
| title_full | The Theory of Credibility and the Reputation-Bias of Policy. |
| title_fullStr | The Theory of Credibility and the Reputation-Bias of Policy. |
| title_full_unstemmed | The Theory of Credibility and the Reputation-Bias of Policy. |
| title_short | The Theory of Credibility and the Reputation-Bias of Policy. |
| title_sort | theory of credibility and the reputation bias of policy |
| work_keys_str_mv | AT forderj thetheoryofcredibilityandthereputationbiasofpolicy AT forderj theoryofcredibilityandthereputationbiasofpolicy |