Establishing a Hawkish Reputation: Interest Rate Setting by Newly Appointed Central Bank Governors

Matthias Neuenkirch

No 201246, MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: In this paper, we explore the interest rate setting behavior of newly appointed central bank governors. We use the Kuttner and Posen (2010) sample, which covers 15 OECD countries, and estimate an augmented Taylor (1993) rule for the period 1974–2008. We find, first, that newly appointed governors fight inflation more aggressively during the first four to eight quarters of their tenure in an effort to establish a reputation for being inflation averse. Second, we find a significantly stronger reaction to inflation by newly appointed governors working within monetary policy frameworks comprised of an at least partly independent central bank and an explicit nominal anchor.

Keywords: Central bank governors; credibility; inflation; monetary policy; reputation; Taylor rules. (search for similar items in EconPapers)
JEL-codes: E31 E43 E52 E58 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2012
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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https://www.uni-marburg.de/en/fb02/research-groups ... -2012_neuenkirch.pdf First version, 2012 (application/pdf)

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Journal Article: Establishing a hawkish reputation: interest rate setting by newly appointed central bank governors (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:201246

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