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Title:Determinants of trust in the European Central Bank PDF Logo
Authors:Fischer, Justina A. V.
Hahn, Volker
Issue Date:2008
Series/Report no.:SSE/EFI Working Paper Series in Economics and Finance 695
Abstract:In this paper we study the determinants of citizens' trust in the European Central Bank during the start-up phase from 1999-2004. Using a country panel based on the Eurobarometer survey, we find that higher inflation rates reduce trust. Thus people appear to evaluate the performance of the ECB on the basis of its success in achieving its primary objective, namely price stability. However, national income also has a strong impact, which poses a dilemma to the ECB, as there is a general consensus among academics that monetary policy cannot increase economic growth in the long run. Unemployment does not have a significant impact on trust in the ECB, while unemployment spending exerts a trust-building impact. Possibly, automatic stabilizers serve as substitutes for ECB interventions, which would lower people's trust. Interestingly, active labor market policies, which can be interpreted as proxies for the public's perception of the urgency of the problem of high unemployment, tend to decrease trust.
Subjects:ECB
trust
European Union
Eurobarometer
panel data
behavioral economics
JEL:C33
E58
H50
Z13
Document Type:Working Paper
Appears in Collections:SSE/EFI Working Paper Series in Economics and Finance, EFI - The Economic Research Institute, Stockholm School of Economics

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