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Transparency and Trust: The Case of the European Central Bank

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  • Roman Horvath

    (Charles University, Prague)

  • Dominika Katuscakova

Abstract

We examine how the transparency of the European Central Bank’s monetary policy affects the amount of trust that the citizens of the European Union have in this institution. We use nearly half a million individual responses from the European Commission’s Eurobarometer survey from 2000-2011 and estimate probit regressions with sample selection. We find that transparency exerts a non-linear effect on trust. Transparency increases trust, but only up to a certain point; too much transparency harms trust. This result is robust to controlling for a number of macroeconomic conditions, financial stability transparency measures, and economic and socio-demographic characteristics of respondents, including examining respondents in European Union countries that do not use the euro and addressing clustering issues.

Suggested Citation

  • Roman Horvath & Dominika Katuscakova, 2015. "Transparency and Trust: The Case of the European Central Bank," Working Papers 352, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
    • Handle: RePEc:ost:wpaper:352
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    References listed on IDEAS

    as
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    Cited by:

    1. Alan S. Blinder & Michael Ehrmann & Jakob de Haan & David-Jan Jansen, 2022. "Central Bank Communication with the General Public: Promise or False Hope?," Working Papers 291, Princeton University, Department of Economics, Center for Economic Policy Studies..
    2. Brouwer, Nils & de Haan, Jakob, 2022. "The impact of providing information about the ECB’s instruments on inflation expectations and trust in the ECB: Experimental evidence," Journal of Macroeconomics, Elsevier, vol. 73(C).
    3. Giorgio Liotti & Rosaria Rita Canale, 2021. "Trust in the European Union project and the role of ECB," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 38(2), pages 461-482, July.
    4. Braun, Benjamin, 2016. "Speaking to the people? Money, trust, and central bank legitimacy in the age of quantitative easing," MPIfG Discussion Paper 16/12, Max Planck Institute for the Study of Societies.
    5. Katrien Smuts, 2023. "Exploring the network of individuals that influence the media's inflation message in South Africa," WIDER Working Paper Series wp-2023-116, World Institute for Development Economic Research (UNU-WIDER).
    6. Bernd Hayo & Pierre-Guillaume Méon, 2022. "Preaching to the agnostic: Inflation reporting can increase trust in the central bank but only among people with weak priors," MAGKS Papers on Economics 202245, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    7. Jean-Marie Dufour & Joachim Wilde, 2018. "Weak identification in probit models with endogenous covariates," AStA Advances in Statistical Analysis, Springer;German Statistical Society, vol. 102(4), pages 611-631, October.
    8. Hwang, In Do & Lustenberger, Thomas & Rossi, Enzo, 2023. "Central bank communication and public trust: The case of ECB speeches," Journal of International Money and Finance, Elsevier, vol. 137(C).
    9. Mellina, Sathya & Schmidt, Tobias, 2018. "The role of central bank knowledge and trust for the public's inflation expectations," Discussion Papers 32/2018, Deutsche Bundesbank.
    10. Aleksandra Gawel & Timo Toikko, 2021. "Trust in European Institutions in Explaining the Entrepreneurship in European Union Countries," Social Sciences, MDPI, vol. 10(6), pages 1-16, May.
    11. Hyunwoo Kim, 2023. "Monetary technocracy and democratic accountability: how central bank independence conditions economic voting," Review of International Political Economy, Taylor & Francis Journals, vol. 30(3), pages 939-964, May.
    12. Ruttachai Seelajaroen & Pornanong Budsaratragoon & Boonlert Jitmaneeroj, 2020. "Do monetary policy transparency and central bank communication reduce interest rate disagreement?," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 39(3), pages 368-393, April.

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    More about this item

    Keywords

    European Central Bank; trust; transparency; survey;
    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

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