Trust in the monetary authority

Dirk Bursian and Ester Faia

No 14, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: Trust in policy makers .uctuates signi.cantly over the cycle and a¤ects the transmission mechanism. Despite this it is absent from the literature. We build a monetary model embedding trust cycles; the latter emerge as an equilibrium phenomenon of a game-theoretic interaction between atomistic agents and the monetary authority. Trust a¤ects agents.stochastic discount factors, namely the price of future risk, and through this it interacts with the monetary trans- mission mechanism. Using data from the Eurobarometer surveys we analyze the link between trust and the transmission mechanism of macro and monetary shocks: empirical results are in line with theoretical ones.

Keywords: trust evolutionary games; risk perception; monetary transmission mechanism (search for similar items in EconPapers)
JEL-codes: E0 E5 (search for similar items in EconPapers)
Date: 2013, Revised 2013
New Economics Papers: this item is included in nep-cba, nep-hpe, nep-mac, nep-mon and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Trust in the monetary authority (2018)
Working Paper: Trust in the Monetary Authority (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:14

DOI: 10.2139/ssrn.2245574

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