Trust in the monetary authority : [draft: april 2014]

Trust in policy makers fluctuates signi…cantly over the cycle and affects the transmission mechanism. Despite this it is absent from the literature. We build a monetary model embedding trust cycles; the latter emerge as 
Trust in policy makers fluctuates signi…cantly over the cycle and affects the transmission mechanism. Despite this it is absent from the literature. We build a monetary model embedding trust cycles; the latter emerge as an equilibrium phenomenon of a game-theoretic interaction between atomistic agents and the monetary authority. Trust affects agents' stochastic discount  factors, namely the price of future risk, and through this it interacts with the monetary transmission mechanism. Using data from the Eurobarometer surveys, we analyze the link between trust and the transmission mechanism of macro and monetary shocks: Empirical results are in line with theoretical ones.
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Metadaten
Author:Dirk Bursian, Ester Faia
URN:urn:nbn:de:hebis:30:3-342100
URL:http://www.wiwi.uni-frankfurt.de/profs/faia/welcome_files/BF_trust_final.pdf
Document Type:Report
Language:English
Year of Completion:2014
Year of first Publication:2014
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2014/08/14
Tag:betrayal aversion; monetary transmission mechanism; trust games
Issue:draft: april 2014
Pagenumber:46
Note:
First draft: September 2012. This draft: April 2014.
HeBIS PPN:347278450
Institutes:Wirtschaftswissenschaften
House of Finance (HoF)
Center for Financial Studies (CFS)
Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:330 Wirtschaft
JEL-Classification:E0 General
E5 Monetary Policy, Central Banking, and the Supply of Money and Credit
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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