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Once bitten, twice bold? Early life tragedy and central bankers’ reaction to COVID-19

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  • Aslam, Maqsood
  • Farvaque, Etienne

Abstract

Have negative experiences (in particular, natural disasters) that central bankers’ have known in their early life influenced monetary policy decisions in front of the COVID-19 pandemic? We answer this question using a sample of 19 developing countries. We show that central bankers who experienced episodes of epidemics in their early life lowered interest rates faster and lower during the COVID-19 pandemic. Personal experience of decision-makers has contributed strongly to explain their behavior during the crisis.

Suggested Citation

  • Aslam, Maqsood & Farvaque, Etienne, 2022. "Once bitten, twice bold? Early life tragedy and central bankers’ reaction to COVID-19," Finance Research Letters, Elsevier, vol. 44(C).
    • Handle: RePEc:eee:finlet:v:44:y:2022:i:c:s1544612321001410
    DOI: 10.1016/j.frl.2021.102060
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    More about this item

    Keywords

    Policy rate; COVID-19; Pandemic; Central banks;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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