Trust in central banks and crypto: the influence of households' knowledge

Central banks increasingly recognise that public trust is essential for effective monetary policy. When households trust a central bank, their inflation expectations tend to remain anchored to the official target, reducing the risk of self-fulfilling inflationary dynamics. This dissertation investigates the drivers and consequences of public trust in the European Central Bank (ECB), with a particular focus on the role of knowledge.

Using survey data among Dutch households, this research first examines what determines trust in the ECB. Knowledge of the ECB and trust in other European institutions emerge as important predictors, while standard demographic variables such as age, education and income play a more limited role. Individuals who trust the ECB hold inflation expectations more closely aligned with its target.

The dissertation further demonstrates that the type of knowledge matters. Experimental evidence shows that knowledge about the ECB's monetary policy instruments helps anchor inflation expectations, particularly among individuals whose expectations previously exceeded the target, but does not significantly affect trust. Conversely, knowledge about the ECB's institutional independence increases trust, but has no measurable effect on inflation expectations. These findings reveal that different types of knowledge serve different functions in shaping public attitudes toward central banks.

Finally, this research extends to the domain of cryptocurrencies, examining what drives households' knowledge of these digital assets. Education, diverse information sources and investment experience promote knowledge, whereas reliance on social media or friends does not.