Who Supports the ECB? Evidence from Eurobarometer Survey Data

• Author: Alexander Mihailov,Muhammad Azmat Hayat,Etienne Farvaque
• DOI: http://doi.org/10.1111/twec.12472
• Published date: 01 April 2017
• Date: 01 April 2017

Who Supports the ECB? Evidence from

Eurobarometer Survey Data

Etienne Farvaque

1,2,3

, Muhammad Azmat Hayat

4

and Alexander Mihailov

5

1

LEM –CNRS (UMR 9221), Universit

e de Lille, Villeneuve d’Ascq Cedex, France,

2

Skema Business

School, Lille, France,

3

CIRANO, Montr

eal, QC, Canada,

4

Department of Economics, University of

the Punjab, Lahore, Pakistan and

5

Department of Economics, University of Reading,

Reading, UK

1. INTRODUCTION

THE global financial crisis (GFC) of 2008–09 and the subsequent Euro-area debt prob-

lems, especially in the so-called peripheral or PIIGS countries (Portugal, Ireland, Italy,

Greece and Spain), have led to doubts and disapproval from politicians and the public with

regard to the models, forecasts, policies and communication strategies employed by mone-

tary authorities. This lower credibility of monetary policy increases the incentives of politi-

cians to criticise central banks and to exert pressures on their institutional independence

(Waller, 1991). Moreover, since early 2013, excessive disinflation and risk of deflation have

taken centre stage in the monetary policy debate in the Euro area, attracting condensed

attention by the public. Such turbulent and unusual developments at the background of the

Great Moderation (from around 1993 through 2007) have undoubtedly affected the percep-

tions of the population in the Member States of the European Monetary Union (EMU)

about their supranational and highly independent central bank, the European Central Bank

(ECB). During such precarious episodes, central banks need the strongest support from the

population they can mobilise. Public support is particularly relevant and pressing for a rela-

tively young institution such as the ECB, the more so in the wake of the deepest global

recession for nearly a century. Since its creation, the ECB has suffered from accusations of

a lack of accountability

1

and, consequently, of misaligned interests and policies with respect

to national governments and electorates. The GFC and the Euro-area debt crisis have made

the concern even more acute.

We acknowledge particularly stimulating comments from Riccardo Rovelli, as well as from the associate

editor and the referees of the journal. We also thank Gunther Capelle-Blancard, J

ezabel Couppey-Sou-

beyran, Hakim Hammadou, J

er^

ome H

ericourt, Julien Idier, Clemens Kool, Bertrand Maillet, Mathias

Morys, Manfred Neumann, Kerry Patterson, Agn

es B

enassy-Qu

er

e, Koen Schoors, Pierre Siklos, Karsten

Staehr, St

ephane Vigeant and the audiences at the joint University of Paris 1 (Panth

eon Sorbonne) &

Banque de France workshop in monetary theory, at the annual conferences of the Irish Economic Asso-

ciation in Limerick, the Eurasia Business and Economics Society in Istanbul, and the GdRE/CNRS in

Money, Banking and Finance in Reading, as well as at the Russian Summer School on Institutional

Economics in Moscow and the Eurosymposium conference in Bayreuth. Farvaque has benefited from the

financial support of the ANR-JSPS Chorus programme. Hayat thanks the Higher Education Commission

(HEC) of Pakistan for their financial support. Mihailov is grateful to the University of Lille 1 for grant-

ing him an invited professorship that facilitated the work along the project. The usual disclaimer for any

remaining errors and omissions applies.

1

See, among others, Berman and McNamara (1999), the debate between Buiter (1999), Issing (1999)

and Kaltenthaler et al. (2010).

©2016 John Wiley & Sons Ltd

654

The World Economy (2017)

doi: 10.1111/twec.12472

The World Economy

In a nutshell, if people trust the ECB, then its legitimacy as a supranational institution and

the credibility of its monetary policy will be higher.

2

It can furthermore be argued that trust

in the ECB and support for its policy could be enhanced by active communication (explaining

its objectives, constraints, instruments and effects) with the European polities. A clear and

transparent communication strategy is even needed more if the population’s support for a cen-

tral bank’s policy declines, as it seems to be the case post-GFC, and not just in the Euro area.

But, as Blinder et al. (2008) show, no consensus has shaped out on an optimal communication

strategy of a central bank.

Although some papers have attempted to check how ECB’s communication is received by

the markets, very few have been able to ascertain the width of the support for the ECB in the

European population at large. It can certainly be affirmed that monetary policy impacts every-

one’s everyday life. Starting from such a premise, the study of attitudes and values is now

recognised as an important source of information for economists, and the availability of the

Eurobarometer survey data has put the European integration process under the magnifying

glass (see, e.g., Gabel, 1998 or Nelsen and Guth, 2000). Concerning monetary issues in partic-

ular, G€

artner (1997), Hayo (1999) and Jonung (2004) examine the emergence of the euro as a

currency and its popular support.

But the trust of the Europeans in the ECB and its evolution over time has not yet been

exhaustively explored. In fact, such a literature is only emerging. Moreover, research has

mostly looked one-sidedly either at the typical macroeconomic (country level) indicators

determining trust in a central bank, such as inflation, unemployment, real GDP growth and fis-

cal measures, or at the standard sociodemographic (individual level) determinants of central

bank trust. By contrast, the present paper is among the first to examine micro-level sociode-

mographic factors from the Eurobarometer surveys jointly with alternative macroeconomic

indicators of trust in the ECB over the whole span of the EMU across time (survey waves)

and space (member countries). Our purpose with such an approach is to evaluate and compare

the relative importance of these two major types of determinants of trust in the ECB, as well

as to study their evolution as the EMU membership has been expanding.

Kaltenthaler and Anderson (2001) analyse the support for a European monetary policy, but

in a very early and short sample, 1994–97, that is when the single currency was not yet born.

Hudson (2006) provides some evidence on trust in the ECB, showing that the usual sociode-

mographic variables are significant. However, the data used are for the year 2001 only. Ban-

ducci et al. (2009) examine the evolution of trust in the euro, analysing how Europeans have

perceived the inflationary effects of the transition to the new currency. Kaltenthaler et al.

(2010) have evaluated the distrust of the public opinion in the ECB. They find that the distrust

towards the ECB is stronger when people consider that the bank is too autonomous to reflect

their own preferences. However, in contrast to our work here, they rely on a single survey

wave (Eurobarometer 65.2 of 2006) and do not include any macroeconomic indicators as an

explanatory variable. Moreover, distrust is considered with regard to the degree of indepen-

dence the ECB enjoys, and not with regard to the policy it implements.

Studies of the macro-determinants of the trust in the ECB at a country level have also

emerged. Fischer and Hahn (2008) show that higher inflation reduces the trust in the ECB. Roth

(2009), W€

alti (2012) and Gros and Roth (2014) have revisited such findings, in particular

2

One can expect central bank support to be also sensitive to the business cycle (Stevenson and Wolfers,

2011).

©2016 John Wiley & Sons Ltd

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