Trust in the Central Bank and Inflation Expectations

52 Pages Posted: 14 Jan 2020

See all articles by Dimitris Christelis

Dimitris Christelis

Adam Smith Business School, University of Glasgow; Centre for Studies in Economics and Finance (CSEF), University of Naples Federico II; Center for Financial Studies (CFS); 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 and Statistics; Center for Studies in Economics and Finance - CSEF; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Maarten van Rooij

De Nederlandsche Bank; Netspar

Multiple version iconThere are 3 versions of this paper

Date Written: December 2019

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.

Keywords: anchoring, Inflation expectations, Inflation uncertainty, subjective expectations, trust in the ECB

JEL Classification: D12, D81, E03

Suggested Citation

Christelis, Dimitrios and Georgarakos, Dimitris and Jappelli, Tullio and van Rooij, Maarten, Trust in the Central Bank and Inflation Expectations (December 2019). CEPR Discussion Paper No. DP14202, Available at SSRN: https://ssrn.com/abstract=3518541

Dimitrios Christelis (Contact Author)

Adam Smith Business School, University of Glasgow ( email )

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

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Center for Financial Studies (CFS) ( email )

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Dimitris Georgarakos

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

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Germany

Center for Financial Studies (CFS) ( email )

Gr├╝neburgplatz 1
Frankfurt am Main, 60323
Germany

Tullio Jappelli

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

Via Cintia - Monte S. Angelo
Napoli, 80126
Italy

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

Center for Studies in Economics and Finance - CSEF

University of Naples Federico II
Via Cinthia - Monte S. Angelo
Napoli, 80146
Italy

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

Centre for Economic Policy Research (CEPR)

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United Kingdom

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European Corporate Governance Institute (ECGI)

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Maarten van Rooij

De Nederlandsche Bank ( email )

P.O. Box 98
Amsterdam, 1000 AB
Netherlands

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