Testing Credibility

Analysis of credibility became an active research topic once Kydland and Prescott (1977) put a new foundation under earlier work on policy rules. Since that time, and particularly following Barro and Gordon's (1983) JPE paper, there has been an explosion of literature on this topic. Much less has been done empirically. RogofF's paper is a welcome addition to a small literature on the empirical testing of credibility hypotheses in game theoretical models. Do central banks behave as in Barro-Gordon type models? Are they bold and decisive as McCallum wants them to be? Or do they behave in some other way?