Trust in the monetary authority : [draft: july 2013]
- The efficacy of monetary authority actions depends primarily on the ability of the monetary authority to affect inflation expectations, which ultimately depend on agents' trust. We propose a model embedding trust cycles, as emerging from sequential coordination games between atomistic agents and the policy maker, in a monetary model. Trust affects agents' stochastic discount factor, namely the price of future risk, and their expectation formation process: these effects in turn interact with the monetary transmission mechanism. Using data from the Eurobarometer survey we analyze the link between trust on the one side and the transmission mechanism of shocks and of the policy rate on the other: data show that the two interact significantly and in a way comparable to the obtained in our model.
| Author: | Dirk BursianGND, Ester FaiaGND |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-293848 |
| URL: | http://ssrn.com/abstract=2245574 |
| DOI: | https://doi.org/10.2139/ssrn.2245574 |
| Parent Title (German): | SAFE working paper series ; No. 14 |
| Series (Serial Number): | SAFE working paper (14) |
| Publisher: | Goethe-Univ., House of Finance, Sustainable Architecture for Finance in Europe, SAFE |
| Place of publication: | Frankfurt am Main |
| Document Type: | Working Paper |
| Language: | English |
| Year of Completion: | 2013 |
| Year of first Publication: | 2013 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2013/04/19 |
| Tag: | monetary transmission mechanism; trust driven expectations; trust evolutionary games |
| Issue: | draft: july 2013 |
| Page Number: | 48 |
| Note: | First draft: September 2012. This draft: July 2013. |
| HeBIS-PPN: | 337763593 |
| Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
| Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF) | |
| Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Sammlungen: | Universitätspublikationen |
| Licence (German): |  Deutsches Urheberrecht |
