Trust in the Central Bank and Inflation Expectations

38 Pages Posted: 14 Nov 2016 Last revised: 17 Nov 2016

See all articles by Dimitris Christelis

Dimitris Christelis

Centre for Studies in Economics and Finance (CSEF), University of Naples Federico II; Center for Financial Studies (CFS); ARC Centre of Excellence in Population Ageing Research (CEPAR); Netspar

Dimitris Georgarakos

European Central Bank (ECB) - Directorate General Research; Center for Financial Studies (CFS)

Tullio Jappelli

University of Naples Federico II - Department of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Center for Studies in Economics and Finance - CSEF

Maarten van Rooij

De Nederlandsche Bank; Netspar

Multiple version iconThere are 2 versions of this paper

Date Written: November 12, 2016

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 also 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. In addition, higher trust in the ECB raises expectations about GDP growth. The findings suggest that a central bank can influence the economy through people’s expectations, even in times when conventional monetary policy tools likely have weak effects.

Keywords: Inflation expectations, Inflation uncertainty, Anchoring, Trust in the ECB, Subjective Expectations

JEL Classification: D12, D81, E03, E40, E58

Suggested Citation

Christelis, Dimitris and Georgarakos, Dimitris and Jappelli, Tullio and van Rooij, Maarten, Trust in the Central Bank and Inflation Expectations (November 12, 2016). Available at SSRN: https://ssrn.com/abstract=2868508 or http://dx.doi.org/10.2139/ssrn.2868508

Dimitris Christelis

Centre for Studies in Economics and Finance (CSEF), University of Naples Federico II ( email )

Via Cintia, Monte S. Angelo
Naples, NA 80126
Italy

Center for Financial Studies (CFS) ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

ARC Centre of Excellence in Population Ageing Research (CEPAR) ( email )

Australian School of Business
Ground Floor, East Wing UNSW Kensington Campus
Sydney, New South Wales NSW 2052
Australia
+61 (2) 9931 9202 (Phone)

HOME PAGE: http://www.cepar.edu.au

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Dimitris Georgarakos (Contact Author)

European Central Bank (ECB) - Directorate General Research ( email )

Sonnemannstrasse 20
Frankfurt am Main, 60314
Germany

Center for Financial Studies (CFS) ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Tullio Jappelli

University of Naples Federico II - Department of Economics ( email )

Via Cintia - Monte S. Angelo
Napoli, 80126
Italy

HOME PAGE: http://www.csef.it/people/jappelli.htm

Centre for Economic Policy Research (CEPR)

London
United Kingdom

HOME PAGE: http://www.cepr.org/researchers/details/rschcontact.asp?IDENT=106354

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Center for Studies in Economics and Finance - CSEF

84084 Fisciano, Salerno
Italy
+39 089 963 165 (Phone)
+39 089 963 169 (Fax)

HOME PAGE: http://www.csef.it/people/jappelli.htm

Maarten van Rooij

De Nederlandsche Bank ( email )

P.O. Box 98
Amsterdam, 1000 AB
Netherlands

HOME PAGE: http://www.dnb.nl/en/onderzoek-2/onderzoekers/overzicht-persoonlijke-paginas/dnb150127.jsp

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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