Links between trust in the ECB and its interest rate policy

Maciej Albinowski, Piotr Ciżkowicz () and Andrzej Rzońca

Applied Economics, 2014, vol. 46, issue 25, 3090-3106

Abstract: We analyse determinants of trust in the European Central Bank (ECB). Our main finding is that when households have pessimistic expectations, aggressive cuts in interest rates have an adverse effect on their trust in central bank. This result is in accordance with the 'lack-of-confidence shock' hypothesis developed by Schmitt-Groh頡nd Uribe (2012) and in contrast with the 'fundamental shock' hypothesis which implies positive effects of aggressive cuts for trust in the ECB. The result is robust to various changes in the modelling approach.

Date: 2014
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Related works:
Working Paper: Links between the trust in the ECB and its interest rate policy (2013)
Working Paper: Distrust in the ECB – product of failed crisis prevention or of inappropriate cure? (2013)
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DOI: 10.1080/00036846.2014.922674

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