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  Speaking to the People? Money, Trust, and Central Bank Legitimacy in the Age of Quantitative Easing

Braun, B. (2016). Speaking to the People? Money, Trust, and Central Bank Legitimacy in the Age of Quantitative Easing. Review of International Political Economy, 23(6), 1064-1092. doi:10.1080/09692290.2016.1252415.

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Braun, Benjamin1, Author           
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1Soziologie des Marktes, MPI for the Study of Societies, Max Planck Society, ou_1214556              

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Free keywords: money creation; inflation; central bank transparency; central bank communication; ECB; Bank of England
 Abstract: Financial upheaval and unconventional monetary policies have made money a salient political issue. This provides a rare opportunity to study the under-appreciated role of monetary trust in the politics of central bank legitimacy which, for the first time in decades, appears fragile. While research on central bank communication with ‘the markets’ abounds, little is known about if and how central bankers speak to ‘the people.’ A closer look at the issue immediately reveals a paradox: while a central bank's legitimacy hinges on it being perceived as acting in line with the dominant folk theory of money, this theory accords poorly with how money actually works. How central banks cope with this ambiguity depends on the monetary situation. Using the Bundesbank and the European Central Bank as examples, this article shows that under inflationary macroeconomic conditions, central bankers willingly nourished the folk-theoretical notion of money as a quantity under the direct control of the central bank. By contrast, the Bank of England's recent refutation of the folk theory of money suggests that deflationary pressures and rapid monetary expansion have fundamentally altered the politics of monetary trust and central bank legitimacy.

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Language(s): eng - English
 Dates: 2016-11-162016
 Publication Status: Issued
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 Rev. Type: Peer
 Identifiers: DOI: 10.1080/09692290.2016.1252415
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Title: Review of International Political Economy
Source Genre: Journal
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Pages: - Volume / Issue: 23 (6) Sequence Number: - Start / End Page: 1064 - 1092 Identifier: ISSN: 0969-2290
ISSN: 1466-4526