Trust in the Central Bank and Inflation Expectations
52 Pages Posted: 14 Jan 2020
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Trust in the Central Bank and Inflation Expectations
Trust in the Central Bank and Inflation Expectations
Date Written: December 2019
Abstract
Using micro data from the 2015 Dutch CentERpanel, we examine whether trust in the European Central Bank (ECB) influences individuals' expectations and uncertainty about future inflation, and whether it anchors inflation expectations. We find that higher trust in the ECB lowers inflation expectations on average, and significantly reduces uncertainty about future inflation. Moreover, results from quantile regressions suggest that trusting the ECB increases (lowers) inflation expectations when the latter are below (above) the ECB's inflation target. These findings hold after controlling for people's knowledge about the objectives of the ECB.
Keywords: anchoring, Inflation expectations, Inflation uncertainty, subjective expectations, trust in the ECB
JEL Classification: D12, D81, E03
Suggested Citation: Suggested Citation
Dimitris Georgarakos
European Central Bank (ECB) - Directorate General Research ( email )
Sonnemannstrasse 20
Frankfurt am Main, 60314
Germany
Maarten van Rooij
De Nederlandsche Bank ( email )
P.O. Box 98
Amsterdam, 1000 AB
Netherlands
HOME PAGE: http://www.dnb.nl/en/onderzoek-2/onderzoekers/overzicht-persoonlijke-paginas/dnb150127.jsp
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Trust in the Central Bank and Inflation Expectations
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