This paper presents a model for Inflation Targeting under imperfect policy credibility. It modifies the conventional … model in three ways: an endogenous policy credibility process, by which monetary policy can gain or lose credibility over … time; non-linearities in the inflation equation and in the credibility generating process; and an explicit loss function …

References to policy credibility, particularly with regard to fiscal policy, are ubiquitous in both economic literature …)-emerging markets joining a supranational entity that is generally considered to have higher policy credibility-provides a unique … experiment to assess the effects of credibility on sovereign credit. This paper examines the impact of EU accession on three key …