TY  - RPRT
A1  - Bursian, Dirk
A1  - Faia, Ester
T1  - Trust in the monetary authority : [draft: april 2014]
N2  - 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.
KW  - trust games
KW  - betrayal aversion
KW  - monetary transmission mechanism
Y1  - 2014
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/34210
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-342100
UR  - http://www.wiwi.uni-frankfurt.de/profs/faia/welcome_files/BF_trust_final.pdf
N1  - First draft: September 2012. This draft: April 2014.
IS  - draft: april 2014
ER  -