Monetary Policy Credibility 14. Mr. Chairman, monetary policy credibility is crucial for attaining monetary policy objectives, particularly, in a rational expectations environment where economic agents have full information on how the economy works.
It is a solution to the time dynamic inconsistency problem, where the expectations of economic agents are shaped by the actions or inactions of the central bank in the delivery of its mandate. In Africa, the time dynamic inconsistency problem is made worse by fiscal dominance and inadequate central bank operational autonomy. 15.