by Zeev Kril, David Leiser and Avia Spivak
Ben Gurion University of the Negev
In line with the rational expectations approach, economists emphasize transparency as a key factor for central banks' credibility. In this paper, a psychological approach yields different results: trust in the banks' policy is associated with the professionalism and independence of the bank and not with its transparency. It is a subtle difference: transparency is indeed a positive factor in the overall perception of the bank as trustworthy, but a statistical analysis shows that not all aspects of perception are relevant to trust in the bank's credibility in its inflationary policy.
JEL Codes: E58.
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