Under inflation targeting, monetary policy conduction is strongly related with the credibility of the regime. As far as is known, there are no empirical studies that measure the influence of the credibility of the inflation targeting regime on long term interest rate. Hence, based on the assumption that greater credibility reduces the interest rate spread, and based on preliminary evidence that the credibility and the spread are negatively correlated, the paper aims at investigating the influence of credibility on long term interest rates.
Inflation targeting; interest rate; credibility; spread
