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Inflation Literacy, Inflation Expectations, and Trust in the Central Bank: A Survey Experiment

Lena Dräger and Giang Nghiem

No 10539, CESifo Working Paper Series from CESifo

Abstract: This paper studies the causal effect of inflation literacy on inflation expectations and trust in the central bank using a randomized control trial (RCT) on a representative sample of the German population. In an experiment with two steps, we first test the effect of non-numerical information about inflation and monetary policy, the literacy treatment. In the second step, we randomly treat respondents with quantitative information and measure whether those who previously received the literacy treatment, incorporate quantitative information differently into their inflation forecasts. We find that the literacy treatment improves respondents’ knowledge about monetary policy and inflation and raises their trust in the central bank. It also causes a higher likelihood that respondents provide inflation predictions, but does not affect the level of expected inflation. Similarly, those who received the initial literacy treatment do not react differently to the quantitative information in terms of the level of their inflation forecasts, but they react more strongly to some treatments regarding their reported forecast uncertainty and trust in the central bank.

Keywords: inflation literacy; inflation expectations; trust in the central bank; survey experiment; randomized control trial (RCT) (search for similar items in EconPapers)
JEL-codes: D84 E31 E52 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-exp and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Inflation Literacy, Inflation Expectations, and Trust in the Central Bank: A Survey Experiment (2023) Downloads
Working Paper: Inflation Literacy, Inflation Expectations, and Trust in the Central Bank: A Survey Experiment (2023) Downloads
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