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The Simplest Test of Inflation Credibility
Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies.
1993 (English)Report (Other academic)
Abstract [en]

A simple test of inflation target credibility is constructed by subtracting the maximum and minimum inflation rates consistent with the inflation targets from the yields to maturity on nominal bonds. This results in a target-consistent range of real yields on nominal bonds. If expected yields, or market real interest rates on real bonds if such are available, fall outside the range of target-consistent real yields, credibility is rejected. Two concepts of credibility, called absolute credibility and credibility in expectation, are distinguished. The inflation targets of Canada, New Zealand and Sweden are examined with convenient diagrams over yields to maturity and forward interest rates.

Place, publisher, year, edition, pages
Stockholm: IIES , 1993. , 17 p.
Series
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 560
Keyword [en]
monetary policy, inflation expectations, term structure of interest rates
National Category
Economics
Identifiers
URN: urn:nbn:se:su:diva-41884OAI: oai:DiVA.org:su-41884DiVA: diva2:342781
Available from: 2010-08-11 Created: 2010-08-11 Last updated: 2010-08-11Bibliographically approved

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Svensson, Lars E.O.
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CiteExportLink to record
Permanent link

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Citation style
  • apa
  • ieee
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  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
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  • asciidoc
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