Inflation Literacy, Inflation Expectations, and Trust in the Central Bank: A Survey Experiment

Last registered on October 04, 2023

Pre-Trial

Trial Information

General Information

Title
Inflation Literacy, Inflation Expectations, and Trust in the Central Bank: A Survey Experiment
RCT ID
AEARCTR-0012145
Initial registration date
September 19, 2023

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
October 04, 2023, 12:53 PM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Region

Primary Investigator

Affiliation
Leibniz University Hannover

Other Primary Investigator(s)

PI Affiliation
Leibniz University Hannover

Additional Trial Information

Status
Completed
Start date
2022-03-01
End date
2022-07-11
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
Central banks are increasingly communicating with the public to build trust and to guide and anchor inflation expectations in the population by explaining monetary policy decisions. However, many consumers struggle with understanding the concept of inflation and how monetary policy works. Given this context, would it be possible to improve public literacy about inflation and monetary policy by communicating simple and general information about these topics? And would improving consumers' inflation literacy affect their inflation forecasts and affect the way they incorporate quantitative information into their expectations?
We study these questions in a survey experiment with a representative sample of German consumers, who are randomly subjected to two consecutive information treatments: In the first step, half of the respondents are randomly selected to receive a 1-minute reading text with general non-numerical information about inflation and monetary policy. We then ask all respondents some test questions to measure inflation and financial literacy as well as their point predictions on perceived and expected inflation and the inflation target of the ECB.
In the second step, we randomly split the population into five groups. One group acts as a control group with no further information, while the other groups receive additional numerical information treatments on inflation and monetary policy. We then use probabilistic questions to measure posterior perceived and expected inflation and individual forecast uncertainty. Our survey is completed with questions on trust in the ECB and the Bundesbank. This two-step setup allows us to evaluate, first, the causal effect of the literacy treatment on consumers' literacy, their prior inflation predictions, and their trust in the central bank, and second, to investigate how consumers incorporate the quantitative information treatments into posterior inflation predictions, forecast uncertainty as well as trust and whether there are interaction effects with the literacy treatment.
External Link(s)

Registration Citation

Citation
Dräger, Lena and Giang Nghiem. 2023. "Inflation Literacy, Inflation Expectations, and Trust in the Central Bank: A Survey Experiment." AEA RCT Registry. October 04. https://doi.org/10.1257/rct.12145-1.0
Experimental Details

Interventions

Intervention(s)
Intervention (Hidden)
Intervention Start Date
2022-03-01
Intervention End Date
2022-07-11

Primary Outcomes

Primary Outcomes (end points)
Inflation literacy, inflation expectations, trust in the central bank
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
We conduct a two-step experiment: In the first step, half of the respondents are randomly selected to receive a 1-minute reading text with general information about inflation and monetary policy. In this literacy treatment, we briefly explain how inflation/deflation is measured and its relationship with personal consumption, savings, borrowing, and investment. The text is completed with a short introduction about the Eurosystem including both the Bundesbank and the ECB, the primary goal of the Eurosystem in general terms, and the main monetary policy instruments. We then ask all respondents some test questions to measure inflation and financial literacy as well as their point predictions on perceived and expected inflation and the inflation target of the ECB.
In the second step, we randomly split the population into five groups. One group acts as control group with no further information, while the other groups receive one of the following numerical information treatments on inflation: (1) the inflation target of the ECB, (2) the inflation target of the ECB and an additional text about the ECB's commitment to take into account the effect of climate change, (3) the current inflation rate for Germany, and (4) the current inflation rate for Germany and the Bundesbank's inflation projections over the next three years. We then use probabilistic questions to measure posterior perceived and expected inflation and individual forecast uncertainty. Our survey is completed with questions on trust in the ECB and the Bundesbank.
Experimental Design Details
Randomization Method
Randomization was done by the survey institute using a computer.
Randomization Unit
Individuals
Was the treatment clustered?
Yes

Experiment Characteristics

Sample size: planned number of clusters
In the first step of the experiment, we have 2 groups. In the second step, we have 5 groups.
Sample size: planned number of observations
4000
Sample size (or number of clusters) by treatment arms
In the first step of the experiment, each group includes about 2,000 individuals. In the second step, each group consists of about 800 individuals.
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB

Institutional Review Boards (IRBs)

IRB Name
IRB Approval Date
IRB Approval Number

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
No
Data Collection Complete
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials