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Title: Trust in the Central Bank and Inflation Expectations

Author(s): Dimitris Christelis, Dimitris Georgarakos, Tullio Jappelli and Maarten Van Rooij

Publication Date: December 2019

Keyword(s): anchoring, Inflation expectations, Inflation uncertainty, subjective expectations and trust in the ECB

Programme Area(s): Monetary Economics and Fluctuations

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.

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Bibliographic Reference

Christelis, D, Georgarakos, D, Jappelli, T and Van Rooij, M. 2019. 'Trust in the Central Bank and Inflation Expectations'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14202