December 2020 issue contents
Trust in the Central Bank and Inflation Expectations

Dimitris Christelis,a Dimitris Georgarakos,b Tullio Jappelli,and Maarten van Rooijd


Using micro data from the 2015 Dutch CentERpanel, we examine whether trust in the European Central Bank (ECB) influences individuals' expectations and uncertainty about future inflation, and whether it anchors inflation expectations. We find that higher trust in the ECB lowers inflation expectations on average and significantly reduces uncertainty about future inflation. Moreover, results from quantile regressions suggest that trusting the ECB increases (lowers) inflation expectations when the latter are below (above) the ECB's inflation target. These findings hold after controlling for people's knowledge about the objectives of the ECB.

JEL Code: D12, D81, E03, E40, E58

Full article (PDF, 37 pages, 760 kb)

a University of Glasgow, CSEF, CFS, and Netspar
b European Central Bank
c University of Naples Federico II, CSEF, and CEPR
d De Nederlandsche Bank and Netspar