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Explaining Central Bank Trust in an Inflation Targeting Country: The Case of the Reserve Bank of New Zealand

Author

Listed:
  • Bernd Hayo

    (University of Marburg)

  • Florian Neumeier

    (Ifo Institute–Leibniz Institute for Economic Research at the University of Munich)

Abstract

Employing data from a representative population survey conducted in New Zealand in 2016, this paper examines factors that influence, or are at least associated with, public trust in the Reserve Bank of New Zealand (RBNZ). The large number of specifically designed questions allows studying the relationship between six dimensions and RBNZ trust: (i) economic situation, (ii) monetary policy knowledge, (iii) nonspecific trust, (iv) interest and information search, (v) politicians and government, and (vi) socio-demographic indicators. Using ordered logit models, we find that at least one indicator from each of these six dimensions has a statistically significant conditional correlation with individuals’ trust in RBNZ. Satisfaction with own financial situation, objective knowledge about the RBNZ’s main policy objective, responsibility for interest rate setting, subjective knowledge about inflation, trust in government institutions, desire to be informed about RBNZ, age, and full-time selfemployment have a positive relationship with RBNZ trust. The reverse is found for respondents who do not keep up with RBNZ and believe that politicians are long-term oriented. In terms of economic relevance, institutional trust has the largest single impact on RBNZ trust and the subjective and objective knowledge indicators show a strong combined influence.

Suggested Citation

  • Bernd Hayo & Florian Neumeier, 2017. "Explaining Central Bank Trust in an Inflation Targeting Country: The Case of the Reserve Bank of New Zealand," MAGKS Papers on Economics 201728, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    • Handle: RePEc:mar:magkse:201728
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    Cited by:

    1. Bernd Hayo & Florian Neumeier, 2022. "Households’ inflation perceptions and expectations: survey evidence from New Zealand," International Economics and Economic Policy, Springer, vol. 19(1), pages 185-217, February.
    2. Alan S. Blinder & Michael Ehrmann & Jakob de Haan & David-Jan Jansen, 2024. "Central Bank Communication with the General Public: Promise or False Hope?," Journal of Economic Literature, American Economic Association, vol. 62(2), pages 425-457, June.
    3. Cars Hommes & Julien Pinter & Isabelle Salle, 2023. "What People Believe About Monetary Finance and What We Can(’t) Do About It: Evidence from a Large-Scale, Multi-Country Survey Experiment," Staff Working Papers 23-36, Bank of Canada.
    4. Michael J. Lamla & Damjan Pfajfar & Lea Rendell, 2019. "Inflation and deflationary biases in inflation expectations," BIS Working Papers 789, Bank for International Settlements.
    5. Hwang, In Do & Lustenberger, Thomas & Rossi, Enzo, 2023. "Central bank communication and public trust: The case of ECB speeches," Journal of International Money and Finance, Elsevier, vol. 137(C).
    6. Hayo, Bernd, 2023. "Does the ECB's monetary policy affect personal finances and economic inequality? A household perspective from Germany," Economic Modelling, Elsevier, vol. 129(C).
    7. Hayo, Bernd & Neumeier, Florian, 2020. "Public knowledge about and attitudes towards central bank independence in New Zealand," Journal of Banking & Finance, Elsevier, vol. 113(C).
    8. Brouwer, Nils & de Haan, Jakob, 2022. "Trust in the ECB: Drivers and consequences," European Journal of Political Economy, Elsevier, vol. 74(C).
    9. Christian Alexander Belabed & Mariya Hake, 2018. "Income inequality and trust in national governments in Central, Eastern and Southeastern Europe," Working Papers 222, Oesterreichische Nationalbank (Austrian Central Bank).
    10. Bernd Hayo & Florian Neumeier, 2018. "Central Bank Independence in New Zealand: Public Knowledge About and Attitude Towards the Policy Target Agreement," ifo Working Paper Series 266, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.

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    More about this item

    Keywords

    Central Bank Trust; Survey; Public Attitudes; Reserve Bank of New Zealand; Monetary Policy;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • Z1 - Other Special Topics - - Cultural Economics

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