Reputation, credibility and transparency of the monetary authority and the state of expectations

Abstract

For the development of a theory that looks for an explanation about how monetary policy affects the economy it is necessary to understand how economic agents make decisions based on their expectations and confidence. Therein, it is important to know the determinants of expectations and confidence and how these are affected by monetary authority. Using as theoretical references (i) the scheme developed by Dequech (1999a) about the determinants of expectations and confidence; (ii) the assumptions that support the non-neutrality of money; and (iii) the literature about reputation, credibility and transparency, the article seeks to demonstrate the influences of reputation-credibility-transparency trinomial for the state of expectations of the agents, and, consequently, for the monetary policy capacity to affect employment and income keeping prices stability.

Reputation; Credibility; Transparency; Expectation; Confidence