Confidence in the central bank may be enhanced if the government and people respect the central bank’s judgments, and it may be eroded if not. In other words, confidence in money and the financial system are interdependent on each other. Confidence is something like the air; nobody doubts about its existence at normal times.
Confidence may wane in a discontinuous manner unless we make utmost efforts to maintain it. Once confidence is lost, the impact on the economy is enormous. Confidence is fragile. I have started this talk by mentioning the importance of dialogues among academics, practitioners and policymakers.