The Theory of Monetary Policy Credibility

Vol. 22 No. 3 (2002)

Jul-Sep / 2002
Published July 1, 2002
PDF-Portuguese (Português (Brasil))
PDF-Portuguese (Português (Brasil))

How to Cite

Mendonça, Helder Ferreira de. 2002. “The Theory of Monetary Policy Credibility”. Brazilian Journal of Political Economy 22 (3):429-48.

The Theory of Monetary Policy Credibility

Helder Ferreira de Mendonça
Professor do Departamento de Economia da Universidade Federal Fluminense – UFF, Rio de Janeiro/ RJ, Brasil.
Brazilian Journal of Political Economy, Vol. 22 No. 3 (2002), Jul-Sep / 2002, Pages 429-448


This paper analyzes the main arguments concerning credibility theory for monetary authority from the mainstream literature. In this sense, the origin of the debate entitled rules versus discretion is examined and the advances in literature from the central bank independence proposal. The findings denote that the problem of the inflationary bias for conduction of monetary policy is a result of a set of ad hoc hypotheses used by the literature. Thus, the developments in the literature concerning the credibility from inflationary bias represent a particular case for monetary theory.

JEL Classification: E52; E58.

Keywords: Monetary policy credibility rules versus discretion