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Do Markets Care Who Chairs the Central Bank?

Kenneth Kuttner () and Adam Posen ()

No WP07-3, Working Paper Series from Peterson Institute for International Economics

Abstract: This paper assesses the effects of central bank governor appointments on financial market expectations of monetary policy. To measure these effects, we assemble a new dataset of appointment announcements from 15 countries, and conduct an event study analysis on exchange rates, bond yields, and stock prices. The analysis reveals a significant reaction of exchange rates and bond yields to unexpected appointments. The reactions are not unidirectional, and thus do not suggest new governors suffer from a generic credibility problem. Federal Reserve chairman appointments stand out in terms of their unusually pronounced effects on financial markets.

Keywords: Central banking; Monetary policy; Credibility; Financial markets; Event study analysis (search for similar items in EconPapers)
JEL-codes: E58 E61 G14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2007-05
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Related works:
Journal Article: Do Markets Care Who Chairs the Central Bank? (2010) Downloads
Working Paper: Do Markets Care Who Chairs the Central Bank? (2007) Downloads
Working Paper: Do Markets Care Who Chairs the Central Bank? (2007) Downloads
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