Trust in the Monetary Authority
Zusammenfassung
Trust in policy makers fluctuates significantly 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 hocks: empirical results are in line with theoretical ones.
Forschungsbereich
Macro Finance
Schlagworte
trust evolutionary games, risk perception, monetary transmission mechanism
JEL-Klassifizierung
E0, E5
Forschungsdaten
Thema
Macro Finance
Monetary Policy
Fiscal Stability
Monetary Policy
Fiscal Stability
Beziehungen
1
Publikationstyp
Working Paper
Link zur Publikation
Collections
- LIF-SAFE Working Papers [334]