Trust Me! I Am a European Central Banker

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Non-Technical SummaryTrust in central banking has become increasingly important to practitioners. Recently, the Eurosystem, as well as other monetary systems around the globe, has experienced a significant number of unconventional monetary policy measures. Besides keeping interest rates on the main refinancing operations historically low, the Governing Council of the European Central Bank (ECB) inter alia decided to intervene in the bond market through secondary market operations in order to combat the crisis. These interventions have been subject to substantive criticism saying that such bond purchases violate the ECB code of conduct. Here the question arises whether such unconventional measures do indeed run the risk of worsening the credibility of the ECB or benefit the trust-building process by stabilizing or even fostering good macroeconomic conditions. Hence, a systematic investigation of the drivers of trust in the ECB is desirable.We provide new evidence into which factors determine trust in central banking. We use a unique cross-country dataset based on Eurobarometer survey data covering the years 1999 to 2010 which includes a rich set of socio-economic characteristics. We then supplement it with variables meant to reflect a country's macroeconomic condition as well as regional developments. We find that besides individual socio-economic characteristics, macroeconomic conditions play a crucial role in the trust-building process which constitutes boundedly rational behavior in the trust-building process. Factors that are outside the control of the ECB should be irrelevant for the trust-building process of fully rational agents which is, however, not supported by our analysis.Overall, our results suggest that trust in the ECB can be strengthened by an improvement in general macroeconomic conditions in European countries. Therefore, current ECB market interventions may have positive effects on the overall level of trust in the long-run through strengthening and stabilizing effects on the European markets and the European economy in general. We use a unique cross-country dataset which includes a rich set of socioeconomic characteristics and supplement it with variables meant to reflect a country's macroeconomic condition. We find that besides individual socio-economic characteristics, macroeconomic conditions play a crucial role in the trust-building process. Our results suggest that agents are boundedly rational in the tr...

The German Public and Its Trust in the ECB: The Role of Knowledge and Information Search

“…Theory regarding the evolution of an inflation culture in Germany, either based on emphasising social processes or individual experiences, helps explain this result. Our findings strongly suggest that estimates found in some of the existing studies on trust in the ECB (Bursian and Fürth 2012, Roth et al 2012, and Wälti 2012 may be severely biased, as they do not control for this influence. Thus, research on trust in a specific institution should systematically control for generalised institutional trust.…”

“…(2012), Bursian and Fürth (2012), and Ehrmann et al (2013) all discover a general decline in trust in the ECB over the course of the financial crisis. However, as we will argue later, this conclusion may be premature.…”

“…A second group of papers focuses on individual Eurobarometer responses. Farvaque et al (2011) study trust in the ECB and conclude that socio-demographic determinants dominate macroeconomic ones, whereas Bursian and Fürth (2012) emphasise the role of macroeconomic conditions in the trust-building process in addition to individual socio-economic characteristics. Kaltenthaler et al (2010) and Ehrmann et al (2013) add a subjective and noisy measure of factual knowledge of the ECB to individual determinants of trust and find respondents who previously heard about the ECB to be more trusting of it.…”

Determinants of Trust in Institutions in Times of Crisis: Survey‐Based Evidence from the European Union

“…Data on macroeconomic variables are obtained from Eurostat. Bursian and Fürth (2013), in line with La Porta et al (1997), report that a high level of real GDP as a proxy for national income might be regarded as an indicator of an economy that is well-functioning as well as of a certain level of efficiency associated with different economic institutions. Fischer and Hahn (2008) provide evidence that confidence in the ECB significantly benefits from higher national income.…”

Trust in government and fiscal adjustments

“…Perhaps more prominently, Kydland and Prescott (1977), Barro andGordon (1983), andRogoff (1985) emphasize that a high level of credibility and reputation, concepts which are inherently related to trust, increases the efficiency of policy actions in the context of monetary policy. In this respect, Bursian and Fürth (2012) are among the first to examine individual as well as macroeconomic factors that influence trust in the European Central Bank using micro data. Furthermore, Bursian and Faia (2013) use microfoundations of trust and implement trust in the monetary authority into a dynamic macro model.…”