Importance of Trust and Confidence in Central Banks for Effective Monetary Policy

This research analyzes the importance of trust and confidence in central banks for effective monetary policy. It focuses on the impact of financial crisis and non-standard monetary policy tools on the level of trust in the European Central Bank (ECB). The central bank is responsible for maintaining stability within the financial market and implementing transparent and widely accepted monetary tools. Lack of trust in the central bank can lead to a financial crisis. The research aims to identify the measures ECB put in place that had rendered it untrustworthy in the eyes of the market players within the Euro Zone and analyze the justification for such actions.

TRUST AND CONFIDENCE IN CENTRAL BANKS IS CRUCIAL
FOR THE EFFECTIVENESS OF MONETARY POLICY

Executive Summary
Trust and Confidence in central banks is crucial for the effectiveness of monetary policy.
Therefore, the central banks across the globe is supposed to make sure that they implement
monetary tools that it is using are both transparent and widely accepted by players within the
financial market. The central bank is responsible for maintaining stability within the financial
market. It is supposed to put in place measures that can keep the interest rates low.

Acknowledgement
There are many people that have earned my gratitude for their contribution to my time in
graduate school. More specifically, I would like to thank five groups of people, without whom
this thesis would not have been possible: my thesis committee members, my lab mates, my
industrial collaborators, funding agencies, and my family.

Table of Contents
1.1 Introduction................................................................................................................................6
1.2 Background of the Problem.......................................................................................................7
1.3 Research Rationale:...................................................................................................................7
1.4 Aim and objectives:...................................................................................................................8
1.5 Research Questions....................................................................................................................8
1.6 Limitations of the Research.......................................................................................................9
1.7 Summary....................................................................................................................................9
Chapter 2: Literature Review.........................................................................................................10
2.1 Introduction..............................................................................................................................10
2.2 Trust and Confidence in central banks is crucial for the effectiveness of monetary policy....10
2.3 Research Gap:..........................................................................................................................16
2.4 Summary:.................................................................................................................................16
Chapter3: Research Methodology.................................................................................................17
3.1 Introduction:............................................................................................................................17
3.2 Research philosophy:...............................................................................................................17
3.4 Methods:..................................................................................................................................18
3.5 Data collection process:...........................................................................................................19
3.6 Data analysis process:..............................................................................................................19
3.7 Summary..................................................................................................................................20

Chapter 4: Findings and discussion...............................................................................................21
4.1 Introduction..............................................................................................................................21
4.2 Quantitative analysis:...............................................................................................................21
4.3 Qualitative analysis:.................................................................................................................24
4.4 Summary..................................................................................................................................25
Chapter 5: Conclusion and Recommendation...............................................................................26
5.1 Conclusion...............................................................................................................................26
5.2 Linking to objective.................................................................................................................26
Objective 1:................................................................................................................................26
Objective 2:................................................................................................................................27
Objective 3:................................................................................................................................27
Objective 4:................................................................................................................................27
5.3 Scope of the research:..............................................................................................................28
5.4 Recommendation.....................................................................................................................28
References:....................................................................................................................................30

List of Table and Graph
Graph 4.1 ECB contribution..................................................................................................22
Table 4.2 Necessity of central Bank......................................................................................23
Graph 4.2 Necessity of central Bank.....................................................................................23
Table 4.3 Financial instability...............................................................................................24
Graph 4.3 Financial instability..............................................................................................24

Chapter 1: Introduction
1.1 Introduction
Trust and Confidence in central banks is crucial for the effectiveness of monetary policy. All
players within the financial sector of a country look to the Central Bank. It is the backbone of the
country's financial sector. If it happens to be lagging behind in the fulfilment of its objectives,
the country's financial sector would crumble.
The central bank is the main bank of a country. It is responsible for managing money supply,
interest rates, and inflation rates. There are five major objectives of the main bank of a county.
First of all, it is responsible for putting in place measures that can lead to a low inflation rate.
According to Bauer and Becker (2014, p.88), it is the goal of the bank to try by all means to keep
the inflation rate within tolerable limits. Apart from this, the bank is also responsible for
promoting stability within the financial market of a country.
This involves monitoring and managing the conduct of financial market players. It also plays a
huge role in keeping interest rates within reasonable limits. It is the goal of the bank to ensure
that the country's interest rates are good enough to promote economic growth and stability of the
financial market. The exchange rates of the country are also under the control of the central bank.
In order to be successful in as far as carrying out the responsibilities indicated above are
concerned, there is need for the bank to structure a monetary policy that is good enough to
address the issues affecting a country's financial market. Members of the bank use various
financial and economic performance indicators to come up with a monetary policy that is viable
for achieving its objectives (Caprio and Klingebiel, 2012, p.79). They have people working on
the ground and collecting data that is meant for use in the structuring of a monetary policy.
Future projections are made based on the information presented in the data.
But, financial market players including money lending institutions and banks have to put their
trust in the central bank. Otherwise, central bank's monetary policy would not be effective.
Suppose the trust and confidence in the bank is not there, what would happen? Such a situation
would lead to a financial crisis. Lack of trust in the central bank is often as a result of poor or
substandard monetary policy measures. This research critically analyses the impact that the

financial crisis and the non-standard monetary policy tools (e.g. quantitative easing) influenced
the level of trust in the European Central Bank (ECB). It focuses on information highlighted in
appropriate literature that discusses the level of trust in the ECB as a result of the effects of
financial crisis and the non-standard monetary policy tools. The ECB is a central bank of the
European Commission and therefore plays the role of a central bank of any country or regional
community (Diaz-Alejandro, 2015, p.124). It is responsible for the administration of monetary
policy of one of the largest market and financial areas on earth. Like any other central bank, it is
required to formulate a monetary policy that achieves all its major objectives for the good of the
Euro Zone and its partners. Members of the Euro Zone's financial market are supposed to have
trust in its monetary policy for it to be a success.
1.2 Background of the Problem
The financial crisis which started in the year 2007 had a significant impact on the economy of
the entire globe. Even though it started in the U.S., it spread to all countries around the world.
Europe was equally badly hit by the crisis. The consequences of the financial crisis ranges from
job losses, skyrocketing interest rates, collapsing companies, low consumer spending, stagnation
in economic growth, and lack of confidence in the government. Many countries across the globe
including Europe in particular resorted to the implementation of austerity measures. In response,
central banks around the world came up with a number of rigorous measures for purposes of
containing the effects of the crisis. Europe in particular, had taken a good number of steps
centred on stimulating economic growth (Ehrmann, et al. 2013, p.52). The ECB was at the helm
of enforcing specific monetary measures to address the impacts of the crisis. But, some of the
monetary tools that the bank had employed were actually substandard. For example, they used
the quantitative easing method which was aimed at lowering interest rates by buying out
financial market assets. Although this increased money supply in the European economy, it made
it hard for other market players to benefit from an increase in the availability of funds.
1.3 Research Rationale:
The main problem in this case is to points out the role of the central banks during the financial
crisis and according to Blinder, economic management is an important thing in order to
understand the monetary policy and expectance of the public on the bank denotes the trust of the

public. However, the long-term inflation during the financial crisis has lowered the expectation
level of the public towards the Central bank and analysis will help to understand the future of the
price stability to the larger effect. It has been shown by Malendier and Nagel (2016) that
aftermath effect of the financial crisis was bad and the people became less interested to invest in
the bonds. Further, they were willing to buy the fixed rate mortgages to earn speedy profits.
Financial crisis has created negative impact on their investment plans and a lack of consistency
could be seen in the financial field (Ferguson, 2013, p.301).
1.4 Aim and objectives:
Aim of the research is to identify the importance of trust in central banks and role of these banks
on mitigating the effects from the economic crisis.
The objectives of this research are as following:
 To analyze the measures ECB put in place that had rendered it untrustworthy in the eyes
of the market players within the Euro Zone?
 To identify the wrong with the measures that the ECB had implemented
 To analyze the justification that ECB required to have taken such a course of action
 To analyze the objectives of the ECB realised following the implementation of the
substandard monetary policy measures
1.5 Research Questions
The research is mainly going to focus on the information presented in the literature. In order to
streamline the analysis of the information highlighted by the scholars, research questions are
going to be used. Each of them will address a specific issue related to the topic under discussion.
The following research questions are going to be used to draw a concrete conclusion on the
subject at hand.
 What measures did the ECB put in place that had rendered it untrustworthy in the eyes of
the market players within the Euro Zone?
 What was really wrong with the measures that the ECB had implemented?

 Was the ECB justified to have taken such a course of action?
 Were the objectives of the ECB realised following the implementation of the substandard
monetary policy measures?
 How many similar researches have been carried out on the topic?
 How best can the viability of the findings in other researches be verified?
1.6 Limitations of the Research
The research is going to be limited in a number of ways. But, the research questions are going to
be sufficient for viable conclusions on the subject at hand. One of the major limitations of the
research is the choice of the data sources. It is worth mentioning that all the information that is
going to be used to analyse the subject at hand is going to be sourced from scholarly articles and
other academic pieces of writing (Goldstein and Turner, 2016, p.210). Some of the journal
articles are peer reviewed, while others are original. All the data is going to be accessed in line
with ethical standards. Most of the data is readily available on the internet and is freely
accessible to anyone that wants to use it.
Another notable limitation of the research is that the data sources do not provide any means of
evaluating the success or failure of the measures that the ECB had put in place. Most of the data
sources only state the actual successes that had come with the methods that the ECB had used to
curtail the effects of the financial crisis.
1.7 Summary
This chapter briefly describes the content of the research; it also includes research gap, research
aim, objectives, and research questions.

Chapter 2: Literature Review
2.1 Introduction
Several researches have been conducted on the topic in order to discover any new outcomes of
an untrustworthy European Central Bank and whose monetary policy tools do not seem to be
trustworthy. Some comparisons shall be made with other central banks around the world. The
following is literature review of scholarly information that is available on the topic.
2.2 Trust and Confidence in central banks is crucial for the effectiveness of monetary
policy.
Maintaining the stability of the currency of a country or region is the mandate of the central
bank. The ECB is particularly responsible for maintaining the stability of the Euro: the currency
that is used across the Euro Zone. It is supposed to implement specific measures to make sure
that the Euro's strength against major currencies in the world such as the Pound and the U.S.
dollar is always significant. One of the major steps it is required to take is to monitor the
inflation rate. This is a good indicator of the strength of a currency against major currencies in
the global village. But, suppose the financial market players do not seem to have confidence in
the measures that it is undertaking: what would happen? A good number of scholars have
dissected this matter in detail. Therefore, a number of publications are already available on the
topic. The financial market players are aware of what is referred to as “inflation expectations"
(Martinez, Peria and Schmukler 2011, p.201). After a critical analysis of a country's or regions
economic performance, market players often have an idea of the range of the inflation rate based
on their expectations. If the central bank happens to use monetary policy administration tools
that are not trustworthy, the market players may lose faith in it. When something like this
happens, it may result in a number of consequences. According to Schmitd (2012, p.431), such a
lack of trust can lead to "inflation as well as a deflationary bias, depending on the perception of
the objective function of the central bank". The researchers proposed a model that suggested this.

In order to verify the proposition above, the researcher’s analysed financial data from 50, 000
observations in nine countries specially selected based on their economic performance at the
time the research was conducted. This research is an interesting one because it highlights
findings from selected data observations from nine countries that are part of the European
Commission (Martinez Peria and Schmukler, 2011, p.541). These findings are important because
not only do they back the research in this report, but they also provide guidance on the model to
use in order to successfully analyse the impact that lack of trust in the ECB can have on the
stability of the financial market. Other researchers have also corroborated these findings
including xxx () and Reinhart and Rogoff (2011). Therefore, the findings of this research are
worth trusting.
Another research was conducted on the topic to establish what would happen to the state of
the financial market if the players within the financial market had no trust in the central bank.
The research is quite important because it lays a foundation for critically analysing the behaviour
of the members of the financial market as well as the public in response to inflation outcomes or
reports that do not conform to the expectations that they had. The central bank or any country or
region can put in place measures to curb inflation (Gros and Roth, 2009, p.110). In so doing, it
will expect the inflation to fall within a certain range. Following the end of its evaluation of the
financial situation obtaining on the ground, it is supposed to come up with a figure that would
represent the inflation of a country or region (Gros and Roth, 2010, p.412). In order for the
members of the public and the financial market players to put trust in the central bank, the
inflation expectations must be consistent with the predicted values: they should not deviate
significantly from what was initially expected.
In this article, it was shown that norminal stability is supposed to be the final outcome of all
monetary policy measures. This is mainly because it provides an environment that promotes
economic growth and stability. But, the financial market players are supposed to have confidence
in the central bank if nominal stability is to be achieved. According to Reinhart and Rogoff
(2011, p.410), financial market expectations are important for optimum economic growth. They
have the capacity to influence future decisions. For example, they can have a very significant
impact on the public spending and investment. Members of the public and investors rely on
financial market expectations to make the right decisions for their current situation and the

future. This article is important to this research because it lays a foundation for understanding the
outcome of demising confidence in the central bank and its policies. The importance of this
research is even more evident because it provides verified data from other countries in the world
other than those found in the Eurozone. It is therefore a true reflection of what would happen to
an economy in any part of the world if the economy players have no confidence in the central
bank (Roth, 2011, p.652). The research is also highlighting the various outcomes of using
monetary policy tools that are not conventional. Although such tools have been able to achieve
optimum economic performance results in some economies, they have failed to maintain
nominal stability in most economies around the world as noted by the research.
There is yet another research that was conducted on the subject to ascertain the overall
performance of an economy following the implementation of un conventional monetary policy
measures. This research is important because it is one of the major studies that have been
conducted to provide evidence to support the assertion that implementing unconventional
monetary policy measures may cause economic agents to lose trust and confidence in the central
bank. Most importantly, the research discusses the financial market situation that characterised
the Euro Zone following the implementation of a number of unconventional monetary policy
measures. It singles out specific measures that the central bank of the region implemented and
the outcome that resulted (Schmidt, 2016, p.103). The importance of this research is that it
highlights the dangers that are associated with the use of unconventional monetary policy
measures if the steps cannot be applied to all sectors of the economy. In particular, it sheds light
on the fact that not all the monetary policy measures that had been implemented by the ECB had
proven to be effective in all the countries. This is one article which stresses the importance of
using more conventional monetary policy tools in cases where less conventional tools would
prove to be ineffective in certain countries belonging to the European Union. The financial crisis
which began in 2007 led to wide scale austerity measures across Europe and the globe as a
whole. There was need for the continental central bank to put in place monetary policy measures
that would help to quell the impact of the crisis (Johnson et al. 2010, p.413). Number negative
outcomes resulted from the global financial crisis including reduced consumer expenditure, very
high interest rates, mass loss of jobs, stagnation in economic growth, and a crumbling financial
market.

In the report, the literature addresses the issues pertaining to the ECB's monetary policy
measures following the financial crisis of 2007 and the impact that it had on the trust that
financial market players had in the Euro Zone bank. Most of the information that was revealed
by the researchers only singled out the various ways in which the measures that the ECB had
employed influenced the European economy.
The first article to have been reviewed, focus was on the impact that the lack of trust in the
central bank can have on the success of specific monetary policy measures. The article clearly
indicated that such a lack of trust can lead to an inflation as well as a deflationary bias,
depending on the perception of the objective function of the central bank" (Shin, 2010, p.301).
Based on the information that was revealed by the article, it became very clear that the success of
monetary policy measures is largely affected by the trust that the financial market players have in
the central bank.
Another journal article which was reviewed also shed light on how trust in the central bank can
influence the success of monetary policy measures. In particular, it shed light on the impact that
the information provided by the central bank can influence the confidence and trust of the market
players. In particular, it referred to inflation expectations and how they can influence the
confidence and trust that the financial market players can have in the central bank. The
information in this article is important because it clearly states and provides supporting evidence
to explain the fact that the central is indeed responsible for making predictions about the
performance of the economy and the inflation rate in particular. It further went on to give insight
into what would really happen if such inflation projections turned out to be false (Khwaja and
Mian, 2011, p.561).
The U.S. financial market is by far the biggest on earth and its performance largely affects
the global economy. When the global economic crisis of 2007 started, it spread to all the major
economies around the world leaving behind untold damage to countless domestic economies in
its wake. Japan, Britain and the entire Europe were not spared from the effects of the crisis which
included low consumer spending, high unemployment rate and countless job losses. During that
time, it became necessary for the central bank in each of the countries and regions to implement
certain measures to address the effects of the financial crisis. Most notably, confidence in the
central bank played a huge role in influencing the performance of the economy. This article is of

utmost importance to this research based on the fact that it pinpoints the exact outcome of
"guesswork as opposed to confident inflation predictions" (Teimournezhad and Masoumi, 2010,
p.201). Its focus is on the Federal Reserve Bank of the U.S., which is the major central bank of
the global economy.
Dissecting the manner in which the U.S. economy responds to less confident economic
projections. It singled out the fact that such less confident inflation predictions may result in
panic across the financial market. For example, bankers may be forced to raise their interest rates
by a significant extent. They may expect the worst and thus try by all means to quell any such
negative economic projections (Tylor, 2014, p.521). On the other hand, employees may be
forced to press for new wages to cushion against the possibility of harsh economic performance
within the economy. The stock markets are also among the major platforms for understanding
how uncertainty in the inflation rate projections of the central bank can influence an economy.
Investors are often quick to react when they begin to sense uncertainty within the projections of
the central bank. As the article notes, stock markets tumble if the inflation expectations of the
Federal Reserve Bank seem to fall within a very wide range or changes sharply over a short
period of time: often considered as a sign of uncertainty.
Another research focuses on the successes and failures that resulted from the
implementation of substandard monetary policy measures. What makes this research vita and
worth in including in this report is that it underscores the fact that such measures can indeed
produce positive outcomes and that it may also result in catastrophic results depending on how
the financial market players perceive the viability of the central bank's norminal stability
strategies. This important because it brings to light the fact that unconventional monetary policy
tools are not always bad provided they can achieve the right results. Further, it also helps readers
to understand that the confidence of marker players in the central bank is equally important for
the measures to work. The research is quite important because it was compiled by professional
economists and financial market experts in major global economies including Japan, Britain,
Britain, and the U.S. According to this research, the ECB had been very successful in as far as
limiting the rise in interest rates is concerned. But, its success rate was rather low compared to its
counterparts. According to the European Parliament (2014, p.210), the bank's use of
unconventional methods had somewhat been responsible for the lack of success in the measures.

This was mainly because of the lack of confidence in the bank's nominal stability strategies
(European Parliament, 2014, p.100). Therefore, the article provides evidence that it is actually
possible for a central bank to fail to succeed on grounds of low confidence in its strategies.
Another research that critically analyses the success of unconventional monetary policy
measures was carried out by Fawley and Neely (2013, p.102). This research has been able to
focus on quantitative easing, which was at the helm of the ECB's monetary policy measures.
Therefore, this research is in itself important because it singles out one of the most popular
substandard monetary policy measures that are known today. Thanks to the information
highlighted in the report, it is easy to ascertain the full extent of the success of quantitative
easing. There are various indicators in the report that clearly support the idea that quantitative
easing can actually work. In its quantitative easing strategies, the ECB focused was initially
concerned about managing the financial market distress that characterised the economy
following the onset of the financial crisis.
But, the strategies were extended to deal with issues such as dealing with the Eurozone debt
crisis, economic stimulus and minimising the rise in the inflation rate. The information
highlighted in the publication reveals that quantitative easing can actually be applied to a wide
pool of economic issues affecting a specific financial market. But, this does not also eliminate
the need for market players to have confidence in the central bank. It is actually safe to state that
the success that the bank enjoyed following the implementation of its quantitative easing
strategies were largely dependent on the trust and confidence that the financial market players
placed in it Walti (2012, p.412). Therefore, the publication not only substantiates the fact that
financial market players should have an element of trust and confidence in the central bank. But,
it also backs assertions that the unconventional monetary policy tools are indeed able to succeed
or fail depending on how the financial market players respond to them. It thus follows that the
measures may not actually work without confidence or trust in the central bank.
According to West (2011, p.698), the ECB had employed several other measures aimed at
saving the European economy from further collapse. It first begins by clearly highlighting the
manner in which the financial crisis affects the global economy and the European economy in
particular. Such a description is necessary for determining whether the chosen measures for
dealing with the aftermath of the financial crisis are viable or not. The paper further goes on to

assert that the ECB was justified to have resorted to the use of unconventional monetary policy
strategies. According to Abbasi and Linzert (2011, p.423), there were various ways in which the
conventional monetary policy tools failed the central bank of the Eurozone. They singled out the
various ways in which the policies proved to have worked. But, they did not shed much light on
the impact that trust and confidence had on the success of the measures.
2.3 Research Gap:
This research has not compared the success of both the non-standard and standard methods of
saving the economy. It is an important research in that it underpins the fact that unconventional
monetary policy tools do actually work just as much as the conventional ones. Another notable
aspect of this publication is that it actually pinpoints the actual manner in which both the
standard and substandard monetary policy measures. Therefore, it is a not perfect article for
understanding how confidence in the central bank can impact both the implementation and the
success of the strategies.
2.4 Summary:
After conducting the literature review and using qualitative analysis, it has been found that the
role of central banks is extremely vital in order to gain the trust and confidence of the general
public and the financial players of the respective countries.

Chapter3: Research Methodology
3.1 Introduction:
Research methodology helps to collect the information and data regarding any topic and helps to
make proper business decision. It is helpful to complete any research and analytical study.
Various approaches are made to identify the complete process of research and theories are made
to analyze the research proposals. The current topic in this case is the trust in central bank and a
brief statement has been made regarding the financial crisis. The term research methodology will
help to understand the particulars of the financial crisis and will help to analyse the steps taken
by the central banks during this session. The decision making process of the bank and its role
will be discussed in this report. According to the statement of Levine, research methodology
comprises of certain error that will create complication in the research topic. However, to the
broader sense, research methodology helps to points out the limitation of the topic and it helps
the researcher to assess all the risks and strength of the research process.
3.2 Research philosophy:
According to the statement of the Nikido Sama, research philosophy is an essential element of
research methodology and it helps to achieve all the objectives of the research proposal.
This research approach focuses on knowledge gaining as per the study. This particular research
approach will help in collecting the concepts and apply it scientifically and purposefully in this
research. Positivism philosophy will be used in the research that will help in collecting scientific
data. This scientific data collection will result in making research findings more generalized.
3.3 Research Approach
Deductive approach will be used as it is concerned with developing the hypothesis based on the
theory, however no new theory will be generated. The advantages of using this approach is it will
help to explain casual relationship with variables and concepts. It will help in measuring the
concepts quantitatively and will help in generalizing the research findings in a certain extent
(Woiceshyn and Daellenbach, 2015, p.100).

Justification:
There are three kinds of methodologies that ought to be mulled over. They are the inductive
methodology and the deductive methodology and adductive methodology (Zoppei, 2017, p.317).
These methodologies are useful with respect to the point. These methodologies are known as the
examination approaches. The investigative speculations are isolated into two sections. One is the
quantitative and the other is the subjective examination. The methodologies are essential to finish
up the theme diversely with the goal that it tends to be conceivable to make a blueprint in regards
to the equivalent.
3.4 Methods:
According to Mr. Kothari, it is important to adopt a systematic way to come to a conclusion by
obtaining sufficient data regarding the proposed subject matter. The case study is consists of
several topics regarding the literature reviews and the research analysis and a broad description
on the same. The research methods are helpful to assure the proposed program (Woiceshyn and
Daellenbach, 2015, p.230). The main criteria regarding the research method is to find out the
suitable approach relating to the current studies and it is important to trace out the relevant case
reports and sections as well as the recommendations relating to the same. It is also important to
develop the theoretical as well as the methodological insight regarding the particular topic with a
view to know about the negative impression of the acts relating to the financial crisis and try to
eliminate the same for the betterment of the international interest. Furthermore, the methods will
help to walk through a systematic approach so as to interpret the ultimate findings through a
profound manner (Zheng et al. 2016, p.103).
The main problem regarding the topic is to combat against the financial crisis activities so as to
fight against the corruption in a systematic way. It is a fact that the crime is serious in nature and
is emerging but in many developing countries, there is no strict provision regarding the same has
been enacted till now. This case is analysing the recommendations taken by the Central Bank and
the international banks, their approaches towards the poor economic condition of the state and
their effects on the financial as well as the political sphere of the country.

There are certain limitations cropped up regarding the same (Mugarura, 2016, p.67). The topic
covers the chapter on the trust of the public on the Central bank during the economic crisis.
However, recommendation has been made in this regard with an intention to identify all aspects
of the research topic.
3.5 Data collection process:
In the present examination, essential sources included cooperation sessions with the clients and
directors of Primark who helped in picking up data according to the exploration targets. Aside
from that, writing wellsprings of the thesis can be considered as yield of data picked up by means
of auxiliary sources. Devices of optional sources incorporate both the on the web and
disconnected sources like diaries, articles, books, sites, web journals and others.
3.6 Data analysis process:
There are mostly two ways of data collection, Primary and secondary. In this research primary
data collection will be used, Primary data collection is of Qualitative and Quantitative.
Quantitative information then again applies the factual information that is useful in chronicle
information of extensive example sizes. In the present examination, blended methodology for
both the quantitative and subjective system is connected.. In the quantitative data analysis
method, 15 individuals from different sectors of business in Europe were arranged who are part
of the higher authorities of some of the organizations. These individuals will be surveyed on the
questions regarding the effect of economic crisis on their organizations and the role of banks on
mitigating the issues. In order to conduct qualitative analysis, 4 ECB senior employees were
asked for interview sessions and the questions were base on the importance of trust and the role
of monetary policies.
3.7 Summary
This chapter has described the research tools that have helped in better analysis of the topic
through research methods that have been applied.

Chapter 4: Findings and discussion
4.1 Introduction
In this part, with the help of qualitative and quantitative data the researcher has analyzed the
collected data and has helped a part of research process to increase the quality of information and
conclude to the particular topic.
4.2 Quantitative analysis:
The questions that are asked to these participants and their perspectives are as following:
1. Do you feel that the ECB made enough contribution on mitigating the issues of
economic crisis on your organizations?
Options Percentage No of respondents Total respondents
Agree 40 6 15
Disagree 30 5 15
Partially agree 30 4 15
Table 4.1 ECB contribution
According to the survey, 6 individuals agreed that ECB contributed significantly for mitigating
the issues of economic crisis, while 5 disagreed with it. On the other hand 4 of them
acknowledged the contribution of the bank however feel that the contribution was not enough.

Graph 4.1 ECB contribution
Finding and analysis:
Thus, from this survey, it can be derived most of the participants agreed with the contribution of
ECB however; many of them feel the contribution was not enough. Therefore ECB needs to
focus on those customers.
2. Do you feel trust on the central bank is necessary for the economic growth of the
country?
Options Percentage No of respondents Total respondents
Agree 66 10 15
Disagree 14 2 15
Partially agree 20 5 15

Table 4.2 Necessity of central Bank
According to the perspectives of the individuals, 10 of them feel it is important, 2 of them feel it
is not important and other 3 feel that it is partially important.
Graph 4.2 Necessity of central Bank
Therefore, most of the participants thus feel that trust on the central bank is necessary for the
economic growth of the industrial sectors.
3. Do you think that lack of trust brings in financial instability in the economic
growth?
According to the perspective of the participants, 11 of them agreed to this fact, 1 of them
disagreed and 3 of them partially agreed.
Options Percentage No of respondents Total respondents
Yes 82 11 15
No 7 1 15
Partial 15 3 15

Table 4.3 Financial instability
Graph 4.3 Financial instability
Thus it can be stated that lack of trust brings in financial instability in the economic growth and
most of the participants agreed to this fact. For the microeconomics of any country, there is an
immense need to analyse the role of government improper regulation and control of economy
and that cannot be performed without trust.
4.3 Qualitative analysis:
The questions that are asked to the participants and their answers are as following:
1. How can trust of the customers on the central bank help in brining financial stability?
According to the participants, in order to enhance the growth of banking organizations and for
overall growth of the economy, people should keep and trust on the banks. This is because
through this, the revenues of the banks will increase which in turn can help in increasing the
interest rates for the customers and even it can help in controlling the inflation rate. Overall with

the help of trust and confidence, the central bank along with other banking organizations can
contribute significantly to the growth of economy in the region.
2. How can the monetary policies and the tools help in controlling the effects of economic
crisis?
The participants agree that it is extremely important to create the policies which can suit with the
needs of all the customers and the financial organizations. With the help of these policies, any
unethical conduct regarding losses at the time of economic crisis can be eliminated and the
financial growths of the industries can be enhanced as well. Therefore, at the time of economic
crisis, it is important to maintain the policies with effectiveness and changes should be made in
accordance to suit the needs of the current situation of the economy.
Therefore, from the perspectives of the senior employees, it can be assessed that the role of
central banks can be extremely important for the creating the situation under control at the time
of economic crisis. Thus, both quantitative and qualitative analysis showed that all the
stakeholders of these baking organizations want the policies to be stronger and effective on
reducing the effects of economic crisis.
4.4 Summary
The data collection method from secondary research has mainly focused on the role that the
European Central Bank played during the economic crisis of 2008. Due to decreased interest
rates close to almost zero, debts and other unethical conduct that raised the economic crisis in the
year 2008, most of people started losing their trust on the central banks around the world.
However, the roles of these banks were vital in order to mitigate the effects of the crisis.

Chapter 5: Conclusion and Recommendation
5.1 Conclusion
This study discussed on the importance of trust and confidence on the central banks and the
methods that these banks apply in order to reduce the effects of effects of economic crisis.
Controlling the inflation rates and implementing suitable monetary policies helped the banks to
reduce the effect of the crisis on the people. For analyzing the finding of the research, it will be
essential to identify if those matched with the objectives of this research or not. In conclusion,
the central bank is responsible for making sure the economic growth of a country or region is
stable. It implements various measures aimed at promoting stability within the financial market
of a country or specific region. The bank achieves this through the administration of monetary
policy. It uses specific monetary policy tools to control interest rates, employment, currency
exchange rates, and even economic growth. Trust in the central bank is necessary for an effective
monetary policy. Otherwise, a crisis would arise. In the research, the impact of the financial
crisis and the use of sub standard monetary policy tools on the trust of the ECB were considered.
The ECB is one of the largest financial markets on earth. Like every central bank, it is also
required to administer monetary policy.
5.2 Linking to objective
Objective 1:
To analyze the measures that ECB put in place that had rendered it untrustworthy in the eyes of
the market players within the Euro Zone:
This objective has been met with success as the in the literature review part, the responsibility of
the ECB on spreading the financial crisis in Europe was highlighted which included increasing
the interest rates. Although ECB took measures to limit the increase of interest rates, however; if
compared to other parts of the world, the success of limiting was much lower for the bank.
However, with implementations of suitable policies, it was successful on reducing the effects of
economic crisis on the financial players of Europe.

Objective 2:
To analyze the wrong with the measures that the ECB had implemented:
This objective has been met in the literature review part in which it is analyzed that the ECB had
failed to implement the suitable tools of monetary policies due to which it failed to gain the trust
of the market players and along with this, the policies were unconventional ones that did not suit
with the needs of all the sectors of Europe.
Objective 3:
To analyze the justification that ECB required to have taken such a course of action:
This objective has been met with success and in the literature review part. In this context, ECB
has taken measures to control the inflation rate which brought in positive result on mitigating the
issues of the effect of economic crisis in Europe.
Objective 4:
To analyze the objectives of the ECB realised following the implementation of the substandard
monetary policy measures:
In order to implement the substandard monetary policy measures, ECB has taken steps to create
an environment which could bring in economic stability and financial growth for the sectors of
Europe. Therefore, the monetary policies created benefits for the industries of Europe and helped
in mitigating the issues of economic crisis to a large extent.
Therefore, the objectives of this research met with the findings that were derived from this study
and thus the finding states that the steps taken by ECB were not suitable for the sectors of Europe
at the initial stage, however after it was able to mitigate the impacts of economic crisis of the
year 2008, these proved to be beneficial. Moreover, this study further revealed that trust and
beliefs of the customers on the central banks are extremely important in order to induce the
economic growth and benefits of the other banking organizations of the countries. Central banks
can play key role on mitigating all the external factors that can result in negative effects on the
growth of economy in respective countries. It is also essential to ensure growth of banking

sectors in the countries along with influencing the financial players to invest more on the
business growths. However, with implementation of proper and suitable monetary policies it is
possible for the central banks to gain the trust of the people and along with this, it is also
essential to increase the benefits of the people and the financial players in order to ensure that the
growth in the number of customers is significant and can be helpful in overall economic growth
of the country. At the times of economic crisis, the role of the central banks is extremely
important as the policies that they can implement can impact hugely on the mitigation process of
the effects of crisis on the economic growth of the country.
Therefore, the findings of this research were apt with the research aim and objectives and thus
will help in progress of other similar researches in the future as well. Moreover, the participants
of the data collection process readily agreed to the importance of monetary policies of the bank
on ensuring that the trusts of the customers are maintained with effectiveness.
5.3 Scope of the research:
In this chapter, various aspects of the research topic could be understood. Specific research
techniques are required to chalk out in this case. According to the statements published in
various reports and journals, it can be state that ECB has played an important role to retain the
trust of the public on Central bank. However, from the above noted points, it has been observed
that doctrinal methodology and drafting methodology are playing significant role in this case.
Doctrinal approach will help to discuss the research topic with detail analysis. Further, various
aspects of the financial crisis and the steps taken by the Central bank during the process could be
understood through various discussion along with certain criticism.
5.4 Recommendation
Focus on money supply control
By focusing on money supply control, these proposals attribute a causal role for money (held
only for transactions purposes) with respect to inflation, consistent with ‘new consensus’
thinking The steps taken by ECB on controlling the inflation rate can be seen as a positive effort
and thus contributed hugely on the mitigation of the effects of economic crisis. The policy tools
used by the ECB on controlling the situation of economic crisis in Europe were significant one
and it focused on the benefits of the customers rather than on controlling the situations of

financial growths of the banking organizations. This resulted in building and gaining trust and
confidence of the customers which has been a significant contribution from the part of ECB in
Europe.

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Appendix:
Gnatt Chart
Main
activities/
stages
Wee
k 1
Wee
k 2
Wee
k 3
Wee
k 4
Wee
k 5
Wee
k 6
Wee
k 7
Topic
Selection

Data
collection
from
secondary
sources
 
Creating
layout

Literature
review
  
Formation
of the
research
Plan
 
Selection
of the
Appropriat
e Research
Technique
s
 

Primary
data
collection
 
Analysis &
Interpretati
on of Data
Collection
 
Findings of
the Data

Conclusion
of the
Study

Formation
of Rough
Draft
 
Submissio
n of Final
Work
 
Table 1: Gantt chart
(Source: Created by the author)