The influence of media use on layperson monetary policy knowledge in Germany

DOIhttp://doi.org/10.1111/sjpe.12141
Date01 February 2018
AuthorBernd Hayo,Edith Neuenkirch
Published date01 February 2018
THE INFLUENCE OF MEDIA USE ON
LAYPERSON MONETARY POLICY
KNOWLEDGE IN GERMANY
Bernd Hayo* and Edith Neuenkirch*
ABSTRACT
We analyse German citizens’ knowledge about monetary policy and the Euro-
pean Central Bank (ECB), as well as the public’s use of mass communication
media to obtain information about the ECB. We find that a person’s own desire
to be informed about the ECB, together with the use of various media channels
to keep informed, are decisive for both (1) own perception of knowledge about
the ECB and (2) actual level of knowledge. The media-related influence varies
with a person’s level of education and is stronger for subjective knowledge.
Women are significantly less interested in or knowledgeable about both topics.
II
NTRODUCTION
Various private and public institutions all over the world increasingly realise
the importance of citizens having basic economic and financial knowledge.
Consequently, they engage in numerous educational programmes to improve
the public’s understanding of key economic concepts and enhance consumers’
ability to handle financial decisions (Gnan et al., 2007). Among these institu-
tions, central banks have taken a leading role in economic education (for a
detailed overview about central bank education programmes, see Fluch,
2007). Central banks’ support of economic and financial education can be
interpreted as ‘a form of enlightened self-interest’ (Minehan, 2006). From a
central bank’s perspective, as Cathy Minehan, former president of the Federal
Reserve Bank of Boston, put it, an ‘informed public a public that under-
stands our role in the economy will be far more likely to understand and
accept the reasoning behind the difficult decisions that central banks some-
times have to make’ (Minehan, 2006). For example, the Lehman Brothers
default in September 2008 and its far-reaching consequences for financial and
economic development led to a new era of central banking, as a number of
non-standard measures had to be introduced (Giannone et al., 2011).
In this paper, we contribute to the fields of economic knowledge, financial
literacy, central bank communication, and consumer research. This is the first
*University of Marburg
Scottish Journal of Political Economy, DOI: 10.1111/sjpe.12141, Vol. 65, No. 1, February 2018
©2017 Scottish Economic Society.
1
paper to analyse German citizens’ (perception of) knowledge about monetary
policy and the ECB, and their use of mass media to obtain information about
the ECB. More precisely, we aim at a better understanding of public knowl-
edge about the relationship between inflation and the ECB’s main refinancing
rate, the main objective of the ECB, and the ECB’s political independence.
Given that a person’s own perception of her knowledge plays an important
role in her decisions, we add a measure of subjective monetary policy knowl-
edge to our analysis.
In addition, we want to know to what extent people use different media
channels (e.g. newspapers, magazines, or television) to inform themselves
about the ECB. While the ECB itself engages in economic education and com-
municates with the public, media coverage of the ECB is likely to influence
laypeople’s knowledge base, too. For instance, previous studies report a dis-
tinct media influence on inflation expectations (e.g. Lamla and Lein, 2014;
Dr
ager, 2015) and public support for the ECB (Hayo and Neuenkirch, 2014).
As a consequence, we relate information search indicators to both subjective
and objective monetary policy knowledge.
Our analysis is based on a specially designed, representative survey of Ger-
man households, conducted on our behalf in autumn 2011 by Gesellschaft f
ur
Konsumforschung (GfK), one of the biggest German private institutes special-
ising in collecting public opinion data. We adapt a general framework for
interdependencies between media use and economic knowledge developed by
Blinder and Krueger (2004) to our specific questions. Methodically, we
employ seemingly unrelated (ordered) probit regressions to study the following
research questions. First, which factors make it more likely that a person uses
mass media to inform himself about the ECB? Second, does the use of differ-
ent media channels influence a person’s knowledge about the ECB itself and
monetary policy in general? Third, do subjective and objective knowledge dis-
play different patterns?
Our results indicate that a fundamental desire to be informed about mone-
tary policy is a key factor for both information search and knowledge. The
use of different media channels, for example, reading newspapers or watching
television, has a significantly positive influence on both types of knowledge.
However, the influence is stronger and more robust for subjective knowledge.
Moreover, newspaper reading and watching television appear to affect differ-
ent dimensions of actual knowledge. Women are found to be notably less
interested in or knowledgeable about monetary policy issues. We conclude
that to be successful, future education efforts should focus on raising an indi-
vidual’s personal interest in the topic. Moreover, central banks and other
agencies concerned with improving monetary policy knowledge should make a
special effort to reach women. In addition, it is important to factor in a per-
son’s own perception of what he has learned. On the one hand, subjective
knowledge is particularly vulnerable to media influences, while, on the other
hand, it affects financial decisions.
Researchers analyse knowledge about facts and concepts in various eco-
nomic domains, for instance, banking, monetary policy, trade, and public
2BERND HAYO AND EDITH NEUENKIRCH
Scottish Journal of Political Economy
©2017 Scottish Economic Society

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