We define and study transparency, credibility, and reputation in a model where the central bank's characteristics are … unobservable to the private sector and are inferred from the policy outcome. A low-credibility bank optimally conducts a more … inflationary policy than a high-credibility bank, in the sense that it induces higher inflation, but a less expansionary policy in …

credibility EBRS is associated with overheating and current account deficits, IRRs give rise to somewhat opposite results … costs infringed by imperfect credibility …

credibility, because of time-inconsistency of the optimal policy under commitment, and (iii) coordination failure, because a …

lack verifiability, needed for credibility. Central banks announce intermediate targets such as exchange rates, so that the …

price stability. The benefits of credibility (private inflation expectations coinciding with the inflation target) are … discussed. Credibility improves the tradeoff between inflation variability, output-gap variability and instrument variability …