The credibility of the ECB's inflation target in times of Corona: New evidence from an online survey

Winnie Coleman and Dieter Nautz

No 2020/11, Discussion Papers from Free University Berlin, School of Business & Economics

Abstract: Evidence on the credibility of a central bank's inflation target typically refers to the anchoring of survey-based measures of inflation expectations. However, both the survey question and the anchoring criteria are only loosely connected to the actual inflation target used in monetary policy practice. By using the exact wording of the ECB's definition of price-stability, we started a representative online survey of German citizens in January 2019 that is designed to measure the time-varying credibility of the inflation target. Our results indicate that credibility has significantly decreased in our sample period, particularly in the course of the coronavirus pandemic. Interestingly, even though inflation rates in Germany have been clearly below 2% for several years, credibility has declined mainly because Germans increasingly expect that inflation will be much higher than 2% over the medium term.

Keywords: Credibility of Inflation Targets; Household Inflation Expectations; Online Surveys; Coronavirus pandemic (search for similar items in EconPapers)
JEL-codes: E31 E52 E58 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:fubsbe:202011

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