Crisis and Citizens' Trust in the European Central Bank - Panel Data Evidence for the Euro Area, 1999-2012

Throughout the crisis, citizens' trust in the European Central Bank has significantly declined throughout the Euro area (EA-12). Although a decline in the core countries of the EA-12 has been distinct, a more pronounced decline has been taking place in the peripheral countries of the EA-12. Taking panel data and using a fixed effects DFGLS estimation for an EA-12 country sample over the time period of 1999-2012 with a total of 305 observations, this paper detects a negative and significant relationship between unemployment and trust in times of crisis. The robustness analysis of the paper confirms that this decrease in trust is strongly driven by the significant increase in unemployment rates in the four peripheral countries Spain, Ireland, Greece and Portugal.