In turbulent economic times such as the COVID-19 pandemic, central banks are crucial actors for stabilizing the economy. In these times, it is important for central banks to maintain trust. Yet, some monetary policies are controversial. For example, in Europe, large-scale asset purchases as part of the European Central Bank (ECB)’s quantitative easing programs were divisive and became politicized during the eurozone crisis. How did the ECB’s announcement of the Pandemic Emergence Purchase Program (PEPP) affect trust in the central bank across the eurozone? We use unique data from two surveys conducted in Germany and Italy in March and April 2020 that were in the field before and after the ECB announced its new program. We leverage the announcement as a natural experiment (Muñoz et al. 2018), comparing respondents who completed the survey before and after the announcement. Our results show that the announcement significantly increased trust in Italy, while it had no impact in Germany. This suggests that the ECB was able to use expansive monetary policy to counteract both economic and political pressures for divergence during the COVID-19 pandemic.
