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Trust in the Central Bank and Inflation Expectations

Author

Listed:
  • Christelis, Dimitris
  • Georgarakos, Dimitris
  • Van Rooij, Maarten

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.

Suggested Citation

  • Christelis, Dimitris & Georgarakos, Dimitris & Van Rooij, Maarten, 2019. "Trust in the Central Bank and Inflation Expectations," CEPR Discussion Papers 14202, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:14202
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    More about this item

    Keywords

    Inflation expectations; Inflation uncertainty; Anchoring; Trust in the ecb; Subjective expectations;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • E03 - Macroeconomics and Monetary Economics - - General - - - Behavioral Macroeconomics

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