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Trust Me! I am a European Central Banker

Journal of Money, Credit and Banking, Vol. 47, Issue 8, pp. 1503–1530

Authors:
Dirk Bursian,
Sven Fürth
Research Area:
Macro and Finance, Systemic Risk Lab
Date:
Dec 2015
Keywords:
Central Banking, European Central Bank, Financial Crisis, Fiscal Crisis, Trust
Abstract:

In the aftermath of the financial crisis, the ECB has experienced an unprecedented deterioration in the level of trust. This raises the question as to what factors determine trust in central banking. We use a unique cross-country dataset which includes a rich set of socio-economic 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 trust-building process and that current ECB market operations may even be beneficial for trust in the ECB in the long-run.

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