Advanced Search
MyIDEAS: Login to save this paper or follow this series

Do Markets Care About Central Bank Governor Changes? Evidence from Emerging Markets

Contents:

Author Info

Abstract

Central bank governor changes in emerging markets may convey important signals about future monetary policy. Based on a new daily data set, this paper examines the reactions of foreign exchange markets, domestic stock market indices and sovereign bond spreads to central bank governor changes. The data cover 20 emerging markets over the period 1992-2006. We find that the replacement of a central bank governor negatively affects financial markets on the announcement day. This negative effect is mainly driven by irregular changes, i.e., changes occurring before the scheduled end of tenure, sending negative signals about perceived central bank independence. Personal characteristics of the central banker, to the contrary, are less important for market reactions. We find no evidence that changes in the central banker’s conservatism affect the reactions of the markets. Finally, market reactions are similar in countries with high and low degrees of central bank independence.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.kof.ethz.ch/publications/science/pdf/wp_177.pdf
Download Restriction: no

Bibliographic Info

Paper provided by KOF Swiss Economic Institute, ETH Zurich in its series KOF Working papers with number 07-177.

as in new window
Length: 46 pages
Date of creation: Oct 2007
Date of revision:
Handle: RePEc:kof:wpskof:07-177

Contact details of provider:
Postal: Leonhardstrasse 21, CH-8092 Zürich
Phone: +41 44 632 42 39
Fax: +41 44 632 12 18
Email:
Web page: http://www.kof.ethz.ch
More information through EDIRC

Related research

Keywords: central bank governor turnover; monetary policy; emerging markets; risk premium;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Ernst Schaumburg & Andrea Tambalotti, 2003. "An Investigation of the Gains from Commitment in Monetary Policy," Macroeconomics, EconWPA 0302004, EconWPA.
  2. Kenneth N. Kuttner & Adam S. Posen, 2007. "Do Markets Care Who Chairs the Central Bank?," NBER Working Papers 13101, National Bureau of Economic Research, Inc.
  3. Andritzky, Jochen R. & Bannister, Geoffrey J. & Tamirisa, Natalia T., 2007. "The impact of macroeconomic announcements on emerging market bonds," Emerging Markets Review, Elsevier, Elsevier, vol. 8(1), pages 20-37, March.
  4. Barro, Robert J., 1986. "Reputation in a model of monetary policy with incomplete information," Journal of Monetary Economics, Elsevier, Elsevier, vol. 17(1), pages 3-20, January.
  5. Berger, Helge & de Haan, Jakob & Eijffinger, Sylvester C W, 2000. "Central Bank Independence: An Update of Theory and Evidence," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2353, C.E.P.R. Discussion Papers.
  6. Axel Dreher & Michael J. Lamla & Sarah M. Rupprecht & Frank Somogyi, 2006. "The impact of political leaders’ profession and education on reforms," KOF Working papers, KOF Swiss Economic Institute, ETH Zurich 06-147, KOF Swiss Economic Institute, ETH Zurich.
  7. Pantzalis, Christos & Stangeland, David A. & Turtle, Harry J., 2000. "Political elections and the resolution of uncertainty: The international evidence," Journal of Banking & Finance, Elsevier, Elsevier, vol. 24(10), pages 1575-1604, October.
  8. Benjamin F. Jones & Benjamin A. Olken, 2005. "Do Leaders Matter? National Leadership and Growth Since World War II," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 120(3), pages 835-864, August.
  9. Hakan Kara, 2004. "Monetary Policy under Imperfect Commitment : Reconciling Theory with Evidence," Working Papers 0415, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  10. Refet S. Gürkaynak & Brian Sack & Eric Swanson, 2003. "The excess sensitivity of long-term interest rates: evidence and implications for macroeconomic models," Proceedings, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue Mar.
  11. Silja Göhlmann & Roland Vaubel, 2005. "The Educational and Professional Background of Central Bankers and its Effect on Inflation – An Empirical Analysis," RWI Discussion Papers, Rheinisch-Westfälisches Institut für Wirtschaftsforschung 0025, Rheinisch-Westfälisches Institut für Wirtschaftsforschung.
  12. Eijffinger, S.C.W. & Hoeberichts, M.M., 1998. "The trade off between central bank independence and conservativeness," Open Access publications from Tilburg University urn:nbn:nl:ui:12-76576, Tilburg University.
  13. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, Elsevier, vol. 18(1), pages 47-82, January.
  14. Bernard Laurens & Martin Sommer & Marco Arnone & Jean-François Segalotto, 2007. "Central Bank Autonomy," IMF Working Papers 07/88, International Monetary Fund.
  15. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
  16. Rogoff, Kenneth, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 100(4), pages 1169-89, November.
  17. Refet S. Gürkaynak & Brian Sack & Eric Swanson, 2005. "The Sensitivity of Long-Term Interest Rates to Economic News: Evidence and Implications for Macroeconomic Models," American Economic Review, American Economic Association, American Economic Association, vol. 95(1), pages 425-436, March.
  18. Helge Berger & Ulrich Woitek, 2005. "Does Conservatism Matter? A Time-Series Approach to Central Bank Behaviour," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 115(505), pages 745-766, 07.
  19. Piga, Gustavo, 2000. " Dependent and Accountable: Evidence from the Modern Theory of Central Banking," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 14(5), pages 563-95, December.
  20. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 85(3), pages 473-91, June.
  21. Kaminsky, Graciela & Schmukler, Sergio, 2001. "Emerging markets instability: do sovereign ratings affect country risk and stock returns?," Policy Research Working Paper Series 2678, The World Bank.
  22. Beck, T.H.L. & Clarke, G. & Groff, A. & Keefer , P. & Walsh, P., 2001. "New tools in comparative political economy: The database of political institutions," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125517, Tilburg University.
  23. Ricardo J. Caballero & Arvind Krishnamurthy, 2004. "Fiscal Policy and Financial Depth," NBER Working Papers 10532, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Matthias Neuenkirch & Peter Tillmann, 2013. "Superstar Central Bankers," Research Papers in Economics 2013-08, University of Trier, Department of Economics.
  2. Förch, Thomas & Sunde, Uwe, 2012. "Central bank independence and stock market returns in emerging economies," Economics Letters, Elsevier, Elsevier, vol. 115(1), pages 77-80.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:kof:wpskof:07-177. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.