Public Opinion on Central Banks when Economic Policy is Uncertain

This paper investigates whether uncertainty about economic policy plays a role in shaping the credibility and reputation of the central bank in the eyes of the public. In particular, we look at the effect of policy uncertainty for the dynamics of citizens’ opinion, being trust, satisfaction or confidence, in the European Central Bank, the Bank of England and the Bank of Japan. Estimating Bayesian VARs for the period 1999-2014, we find that shocks to economic policy uncertainty induce economic contractions and relatively sharp deterioration in trust or satisfaction measures, which in general take longer than economic growth to rebuild.

Keywords: Policy Uncertainty; Central Banks; Public Opinion; Structural VAR

JEL Classification: E02, E31, E58, E63, P16

Suggested Citation: Suggested Citation

Istrefi, Klodiana and Piloiu, Anamaria, Public Opinion on Central Banks when Economic Policy is Uncertain (April 2020). Banque de France Working Paper No. 765, Available at SSRN: https://ssrn.com/abstract=3583343 or http://dx.doi.org/10.2139/ssrn.3583343