Working Paper: CEPR ID: DP6525
Authors: Carin A. B. van der Cruijsen; Sylvester C. W. Eijffinger
Abstract: Central banks have become more and more transparent about their monetary policy making process. In the central bank transparency literature the distinction between actual and perceived central bank transparency is often lacking. However, as perceptions are crucial for the actions of economic agents this distinction matters. A discrepancy between actual and perceived transparency may exist because of incomplete or incorrect transparency knowledge and other (psychological) factors. Even financial experts, the most important channel through which the central bank can influence the economy, might suffer from misaligned perceptions. We investigate the mismatch between actual and perceived transparency and its relevance by analyzing data of a Dutch household survey on the European Central Bank?s transparency. To benefit from higher transparency perceptions the European Central Bank might feel tempted to stress its transparency strengths, but hide its transparency weaknesses.
Keywords: Behavioral Economics; Central Bank Transparency; Perceptions; Survey
JEL Codes: D80; E52; E58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| actual transparency (D73) | perceived transparency (D83) |
| psychological factors (D91) | perceived transparency (D83) |
| mismatch between actual and perceived transparency (D83) | credibility of the ECB (E58) |
| perceived transparency (D83) | inflation expectations (E31) |
| credibility of the ECB (E58) | inflation expectations (E31) |
| perceived transparency (D83) | trust in the ECB (E58) |
| trust in the ECB (E58) | inflation expectations (E31) |