Date Added: Nov 2010
Does the general public know what central banks do? Is this kind of knowledge relevant? Using a survey of Dutch households, the authors investigate these questions for the case of the European Central Bank (ECB). Their findings suggest that knowledge on the ECB's objectives is far from perfect. Both a weak desire to be informed and unawareness of insufficient knowledge are barriers for improving the public's understanding of monetary policy. However, the results also show that more intensive use of information improves understanding, suggesting that the media channel may play an important and constructive role in building knowledge. Finally, they find that knowledge on monetary policy objectives contributes to an individual's ability to form realistic inflation expectations.