DP14202 Trust in the Central Bank and Inflation Expectations
|Author(s):||Dimitris Christelis, Dimitris Georgarakos, Tullio Jappelli, Maarten Van Rooij|
|Publication Date:||December 2019|
|Keyword(s):||anchoring, Inflation expectations, Inflation uncertainty, subjective expectations, trust in the ECB|
|JEL(s):||D12, D81, E03|
|Programme Areas:||Monetary Economics and Fluctuations|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=14202|
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.