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Determinants of Trust in the European Central Bank

  • Justina Fischer
  • Volker Hahn

In this paper we study the determinants of citizens� trust in the European Central Bank during the start-up phase from 1999-2004. Using a country panel based on the Eurobarometer survey, we find that higher inflation rates reduce trust. Thus people appear to evaluate the performance of the ECB on the basis of its success in achieving its primary objective, namely price stability. However, national income also has a strong impact, which poses a dilemma to the ECB, as it cannot increase economic growth in the long run. Unemployment does not have a significant impact on trust in the ECB, while unemployment spending exerts a trust-building impact. Possibly, automatic stabilizers serve as substitutes for ECB interventions, which would lower people�s trust. Interestingly, active labor market policies, which can be interpreted as proxies for the public�s perception of the urgency of the problem of high unemployment, tend to decrease trust.

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Paper provided by Thurgauer Wirtschaftsinstitut, Universit�t Konstanz in its series TWI Research Paper Series with number 26.

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Date of creation: 2008
Date of revision:
Handle: RePEc:twi:respas:0026
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  1. Benno Torgler, 2007. "Trust in International Organizations: An Empirical Investigation Focusing on the United Nations," Working Papers 05-2007, Institute of Local Public Finance.
  2. Richard Clarida & Jordi Galí & Mark Gertler, 1997. "The science of monetary policy: A new Keynesian perspective," Economics Working Papers 356, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 1999.
  3. Herrendorf, Berthold & Lockwood, Ben, 1996. "Rogoff's 'Conservative' Central Banker Restored," CEPR Discussion Papers 1386, C.E.P.R. Discussion Papers.
  4. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
  5. John Hudson, 2006. "Institutional Trust and Subjective Well-Being across the EU," Kyklos, Wiley Blackwell, vol. 59(1), pages 43-62, 02.
  6. Eijffinger, Sylvester C W & Geraats, Petra M, 2002. "How Transparent are Central Banks?," CEPR Discussion Papers 3188, C.E.P.R. Discussion Papers.
  7. repec:tpr:qjecon:v:100:y:1985:i:4:p:1169-89 is not listed on IDEAS
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