02112cas a2200325 a 4500 AALejournalIMF004372 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451971811 1018-5941 BD-DhAAL BD-DhAAL Masson, Paul. Credibility of Policies Versus Credibility of Policymakers / Paul Masson, Allan Drazen. Washington, D.C. : International Monetary Fund, 1994. 1 online resource (28 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Standard models of policy credibility, defined as the expectation that an announced policy will be carried out, emphasize the preferences of the policymaker, and the role of tough policies in signalling toughness and raising credibility. Whether a policy is carried out, however, will also reflect the state of the economy. We present a model in which a policymaker maintains a fixed parity in good times, but devalues if the unemployment rate gets too high. Our main conclusion is that if there is persistence in unemployment, observing a tough policy in a given period may lower rather than raise the credibility of a no-devaluation pledge in subsequent periods. We test this implication on data for the interest rate differential between France and Germany and find support for our hypothesis. Mode of access: Internet Anti-Inflationary Policies Increase imf Government Debt Accumulation imf Objective Function imf Policy Credibility imf WP imf Germany imf Drazen, Allan. IMF Working Papers; Working Paper ; No. 1994/049 Full text available on IMF http://elibrary.imf.org/view/journals/001/1994/049/001.1994.issue-049-en.xml IMF e-Library