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Do Markets Care Who Chairs the Central Bank? Author info | Abstract | Publisher info | Download info | Related research | Statistics Kenneth N. Kuttner () (Oberlin College, Department of Economics)
Adam S. Posen () (Peterson Institute for International Economics)
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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.
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Paper provided by Peterson Institute for International Economics in its series Peterson Institute Working Paper Series with number
WP07-3.
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Date of creation: May 2007Date of revision:
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Keywords: Central banking ; Monetary policy ; Credibility ; Financial markets ; Event study analysis ; Other versions of this item:
Find related papers by JEL classification: E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
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Petra Gerlach-Kristen, 2008.
"The Role of the Chairman in Setting Monetary Policy: Individualistic vs. Autocratically Collegial MPCs ,"
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Moser, Christoph / Dreher, Axel, 2007.
"Do Markets Care about Central Bank Governor Changes? Evidence from Emerging Markets ,"
CESifo Working Paper Series
CESifo Working Paper No. , CESifo Group Munich.
[Downloadable!]
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