Trust in Central Banks and Monetary-Policy Communication

Last registered on July 21, 2022

Pre-Trial

Trial Information

General Information

Title
Trust in Central Banks and Monetary-Policy Communication
RCT ID
AEARCTR-0009736
Initial registration date
July 12, 2022

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
July 21, 2022, 12:32 PM EDT

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

Locations

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Primary Investigator

Affiliation
Goethe University Frankfurt

Other Primary Investigator(s)

PI Affiliation
Goethe University Frankfurt
PI Affiliation
University of Chicago

Additional Trial Information

Status
In development
Start date
2022-06-01
End date
2022-10-31
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
We use a randomized control trial on a sample of German-bank clients to study how central-bank trust affects the effectiveness of monetary-policy communication. Participating bank customers first answer questions on their beliefs about inflation; their trust in individuals and institutions, including the ECB; and their perception of benefiting from recent monetary policy. In a first treatment stage, we randomly divide the sample into subjects that receive information that sheds positive light on the ECB, while the other random half receives negative ECB information. The objective is to induce exogenous variation in trust toward the ECB. Following the first treatment stage, we re-elicit ECB trust and ask about the ECB’s inflation target. In a second treatment stage, we randomly assign two thirds of subjects to a short ECB statement about its commitment to achieve its inflation target over the medium term. In the post-treatment stage, we test how treatment-induced changes in ECB trust affect how subjects incorporate the ECB statement to form consumption plans and macroeconomic expectations. Moreover, bank data allow us to estimate treatment effects on actual consumption and financial choices.
External Link(s)

Registration Citation

Citation
Hackethal, Andreas, Philip Schnorpfeil and Michael Weber. 2022. "Trust in Central Banks and Monetary-Policy Communication." AEA RCT Registry. July 21. https://doi.org/10.1257/rct.9736
Experimental Details

Interventions

Intervention(s)
Intervention Start Date
2022-07-13
Intervention End Date
2022-07-27

Primary Outcomes

Primary Outcomes (end points)
Survey: consumption plan, macroeconomic expectations
Bank data: consumption-savings decisions
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
To study the role of trust in central banks for the effectiveness of monetary-policy communication, we plan to run a randomized control trial on customers of a large German bank. The selection of bank customers is as follows: we invite all bank customers with observable (categorized) consumption as well as all bank customers without observable consumption but who have outstanding debt at the bank to participate in the survey experiment. Customers with observable consumption and debt products from the participating bank are assigned to another research survey experiment, which we run at the same time. All other customers are randomly assigned to this survey experiment or the one we conduct in parallel.

Participating bank customers first answer questions on their beliefs about inflation; their trust in individuals and institutions, including the ECB; and their perception of benefiting from recent monetary policy. In the next stage, we randomly divide the sample into two groups. Both groups receive information about the ECB, but one group receives information about the ECB that is positive (such as, that inflation in Germany since the ECB is responsible for monetary policy has been lower on average than with the Bundesbank), while the other group receives negative information (such as that the ECB has been slow to act on the currently high rate of inflation). We present these information based on actual quotes from German newspapers or a research institute, and randomly vary whether respondents can immediately see the respective information sources. Following the first treatment stage, we re-elicit ECB trust and ask about the ECB’s inflation target.

Next, we include a second information intervention. We randomly assign two thirds of survey participants to a short statement by Christine Lagarde on the ECB’s commitment to bring inflation back to its 2% target. In the post-treatment stage, we ask about consumption and savings plans, as well as the credibility of various news sources. Respondents also state their macroeconomic expectations and answer questions about their background. Apart from an examination of the role of central-bank trust for macroeconomic expectations, bank data allow us to estimate treatment effects on actual consumption and financial choices.

We hypothesize that the first treatment induces exogenous variation in beliefs about the ECB’s commitment and ability to tame inflation. High (exogenous) trust in the ECB should increase the effectiveness of Lagarde’s statement in the second stage, leading to lower inflation expectations, higher interest-rate expectations, and possible effects on consumption-savings decisions.
Experimental Design Details
Not available
Randomization Method
Randomization is performed by a computer that assigns incoming subjects to different experimental arms
Randomization Unit
Individual
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
N/A
Sample size: planned number of observations
Around 4,000
Sample size (or number of clusters) by treatment arms
First treatment: around 2,000 by arm
Second treatment: around 2,666 in the treatment group, and around 1,333 in the control group
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB

Institutional Review Boards (IRBs)

IRB Name
German Association for Experimental Economic Research e.V.
IRB Approval Date
2022-07-12
IRB Approval Number
L9CdFgd4