CORE DP 2026 / 17

In the Fed we trust? Measuring trust in central banking and its effects on the macroeconomy / David Aikman, Francesca Monti, Shunshun Zhang 

> We develop a novel measure of trust in the Federal Reserve using Generative Artificial Intelligence to analyse millions of tweets referencing the Fed, its leadership, and its policy framework and decisions. Our measure exhibits pronounced swings that align with key events and responds intuitively to macro-financial variables and indicators of the U.S. monetary policy stance. To identify exogenous trust shocks, we use a narrative approach based on ethical scandals involving certain FOMC members. We find that trust shocks significantly affect macroeconomic conditions: news sentiment, business conditions, and the stock market all decline, while inflation expectations and market volatility (VIX) increase.