Authors: Kateryna Savolchuk, Tetiana Yukhymenko
Abstract: This study investigates the influence of central bank credibility in forming inflation expectations, using data obtained from business surveys conducted by the National Bank of Ukraine. We employ a two-stage treatment model to mitigate the potential bias of the endogeneity of firms' answers. The results confirm the vital role of credibility in shaping inflation expectations. Notably, credibility reduces sensitivity to past inflation deviations. Robustness checks, which are based on bootstrapping, reinforce the reliability of the findings. Our study underscores the importance of central bank credibility in anchoring inflation expectations.
Cite as: Savolchuk, K., Yukhymenko, T. (2023). The NBU’s Credibility in the Formation of Firms’ Inflation Expectations. NBU Working Papers, 4/2023. Kyiv: National Bank of Ukraine. Retrieved from https://bank.gov.ua/admin_uploads/article/WP_2023-04_Savolchuk_Yukhymenko.pdf
