Trust in the European Union project and the role of ECB

Abstract

Was the European Central Bank able to assure the relaunch of the European project after the weakening of the post-crisis period? To answer this question, this paper presents an empirical analysis connecting citizen trust in the European Union with a variable intended to be a measure of the monetary policy strategy of the European Central Bank, namely, the interest rate on government bonds extracted from the 1-year maturity yield curve. The dynamic panel technique, applied to nineteen Eurozone countries for the time span of 2004–2018, estimates the presence of a long-run common relationship between the variables despite allowing different short-run adjustment mechanisms. Results are revealed to be not univocal: the easy monetary policy strategy is associated for the whole period with a decline of trust, and therefore, despite its impressiveness, it was not sufficient to relaunch the European Union project. However, when considering the change in strategy of the post-2013 period, it seemed to have contributed to a slight inversion of the decline of trust. These results highlight the importance of non-conventional measures and call for further support from coordinated policy action as a response to the negative shock deriving from the COVID-19 pandemic.

Target2 imbalances and poverty in the eurozone

“…The choice of this variable is based on its ability to capture the monetary policy strategy as a whole, as it includes both the ECB interest rate setting policy and the effects of open market operations; the yield curve is a key determinant of the financing conditions of the economy and a central element in the transmission of monetary policy. It is affected contemporaneously by policy interest rates and public and private bond purchase programmes and therefore provides information about the true safe rates present in the market and their potential influence on the real economy (Lane 2019;Liotti and Canale 2021). It is supposed to be positively correlated with poverty; 2) per capita GDP (PC_GDP).…”