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Credibility gains from communicating with the public: evidence from the ECB’s new monetary policy strategy

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  • Ehrmann, Michael
  • Georgarakos, Dimitris
  • Kenny, Geoff

Abstract

We show that the announcement of the ECB’s Strategy Review and the revision of its inflation target in summer 2021 went largely unnoticed by the wider public. Although it is hard to reach out to this group, we find evidence that communicating key elements of the strategy can enhance the perceived credibility that price stability will be maintained in the medium-term. Randomised information treatments reveal that providing additional explanations about monetary policy’s stabilising role has the strongest positive impact on credibility, boosting credibility also among the less financially literate and generating more persistent credibility gains, even after inflation increased. JEL Classification: E52, E58, E31

Suggested Citation

  • Ehrmann, Michael & Georgarakos, Dimitris & Kenny, Geoff, 2023. "Credibility gains from communicating with the public: evidence from the ECB’s new monetary policy strategy," Working Paper Series 2785, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20232785
    Note: 203739
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    References listed on IDEAS

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    Cited by:

    1. Felici, Marco & Kenny, Geoff & Friz, Roberta, 2023. "Consumer savings behaviour at low and negative interest rates," European Economic Review, Elsevier, vol. 157(C).
    2. Dräger, Lena & Nghiem, Giang, 2023. "Inflation Literacy, Inflation Expectations, and Trust in the Central Bank: A Survey Experiment," VfS Annual Conference 2023 (Regensburg): Growth and the "sociale Frage" 277587, Verein für Socialpolitik / German Economic Association.
    3. Hoffmann, Mathias & Mönch, Emanuel & Pavlova, Lora & Schultefrankenfeld, Guido, 2023. "Forceful or persistent: Wow the ECB's new inflation target affects households' inflation expectations," Discussion Papers 27/2023, Deutsche Bundesbank.

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    More about this item

    Keywords

    central bank communication; Consumer Expectations Survey; credibility; financial literacy; randomised control trial;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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