Do Markets Care about Central Bank Governor Changes? Evidence from Emerging Markets
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.
|Date of creation:||2007|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de
More information through EDIRC
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.:
- Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
- Silja Göhlmann & Roland Vaubel, 2005. "The Educational and Professional Background of Central Bankers and its Effect on Inflation – An Empirical Analysis," RWI Discussion Papers 0025, Rheinisch-Westfälisches Institut für Wirtschaftsforschung.
- Kenneth Kuttner & Adam Posen, 2007.
"Do Markets Care Who Chairs the Central Bank?,"
Department of Economics Working Papers
2007-05, Department of Economics, Williams College.
- Kenneth N. Kuttner & Adam S. Posen, 2007. "Do Markets Care Who Chairs the Central Bank?," Working Paper Series WP07-3, Peterson Institute for International Economics.
- 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.
- 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.
- Graciela Kaminsky & Sergio L. Schmukler, 2002. "Emerging Market Instability: Do Sovereign Ratings Affect Country Risk and Stock Returns?," World Bank Economic Review, World Bank Group, vol. 16(2), pages 171-195, August.
- Berger, Helge & de Haan, Jakob & Eijffinger, Sylvester C W, 2001.
" Central Bank Independence: An Update of Theory and Evidence,"
Journal of Economic Surveys,
Wiley Blackwell, vol. 15(1), pages 3-40, February.
- Berger, Helge & de Haan, Jakob & Eijffinger, Sylvester C W, 2000. "Central Bank Independence: An Update of Theory and Evidence," CEPR Discussion Papers 2353, C.E.P.R. Discussion Papers.
- Bernard Laurens & Martin Sommer & Marco Arnone & Jean-FranÃ§ois Segalotto, 2007.
"Central Bank Autonomy; Lessons From Global Trends,"
IMF Working Papers
07/88, International Monetary Fund.
- Ernst Schaumburg & Andrea Tambalotti, 2003.
"An Investigation of the Gains from Commitment in Monetary Policy,"
- Schaumburg, Ernst & Tambalotti, Andrea, 2007. "An investigation of the gains from commitment in monetary policy," Journal of Monetary Economics, Elsevier, vol. 54(2), pages 302-324, March.
- Andrea Tambalotti & Ernst Schaumburg, 2004. "An Investigation of the Gains from Commitment in Monetary Policy," Econometric Society 2004 North American Summer Meetings 282, Econometric Society.
- Ernst Schaumburg & Andrea Tambalotti, 2003. "An investigation of the gains from commitment in monetary policy," Staff Reports 171, Federal Reserve Bank of New York.
- Hakan Kara, 2004.
"Monetary Policy under Imperfect Commitment : Reconciling Theory with Evidence,"
0415, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
- A. Hakan Kara, 2007. "Monetary Policy under Imperfect Commitment: Reconciling Theory with Evidence," International Journal of Central Banking, International Journal of Central Banking, vol. 3(1), pages 149-178, March.
- 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, vol. 120(3), pages 835-864, August.
- Barro, Robert J., 1986.
"Reputation in a model of monetary policy with incomplete information,"
Journal of Monetary Economics,
Elsevier, vol. 17(1), pages 3-20, January.
- Robert J. Barro, 1986. "Reputation in a Model of Monetary Policy with Incomplete Information," NBER Working Papers 1794, National Bureau of Economic Research, Inc.
- Rogoff, Kenneth, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, MIT Press, vol. 100(4), pages 1169-89, November.
- Refet S. Gürkaynak & Brian Sack & Eric Swanson, 2003.
"The excess sensitivity of long-term interest rates: evidence and implications for macroeconomic models,"
Federal Reserve Bank of San Francisco, issue Mar.
- Refet S. Gürkaynak & Brian Sack & Eric Swanson, 2003. "The excess sensitivity of long-term interest rates: evidence and implications for macroeconomic models," Finance and Economics Discussion Series 2003-50, Board of Governors of the Federal Reserve System (U.S.).
- Andritzky, Jochen R. & Bannister, Geoffrey J. & Tamirisa, Natalia T., 2007.
"The impact of macroeconomic announcements on emerging market bonds,"
Emerging Markets Review,
Elsevier, vol. 8(1), pages 20-37, March.
- Jochen R. Andritzky & Geoffrey J. Bannister & Natalia T. Tamirisa, 2005. "The Impact of Macroeconomic Announcementson Emerging Market Bonds," IMF Working Papers 05/83, International Monetary Fund.
- Dreher, Axel & Lamla, Michael J. & Lein, Sarah M. & Somogyi, Frank, 2009.
"The impact of political leaders' profession and education on reforms,"
Journal of Comparative Economics,
Elsevier, vol. 37(1), pages 169-193, March.
- Axel Dreher & Michael J. Lamla & Sarah M. Rupprecht & Frank Somogyi, 2006. "The impact of political leaders’ profession and education on reforms," KOF Working papers 06-147, KOF Swiss Economic Institute, ETH Zurich.
- Ricardo J. Caballero & Arvind Krishnamurthy, 2004. "Fiscal Policy and Financial Depth," NBER Working Papers 10532, National Bureau of Economic Research, Inc.
- Piga, Gustavo, 2000. " Dependent and Accountable: Evidence from the Modern Theory of Central Banking," Journal of Economic Surveys, Wiley Blackwell, vol. 14(5), pages 563-95, December.
- Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
- 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, vol. 95(1), pages 425-436, March.
- Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, June.
- repec:ner:tilbur:urn:nbn:nl:ui:12-3125517 is not listed on IDEAS
- Helge Berger & Ulrich Woitek, 2005. "Does Conservatism Matter? A Time-Series Approach to Central Bank Behaviour," Economic Journal, Royal Economic Society, vol. 115(505), pages 745-766, 07.
- repec:ner:tilbur:urn:nbn:nl:ui:12-76576 is not listed on IDEAS
- Pantzalis, Christos & Stangeland, David A. & Turtle, Harry J., 2000. "Political elections and the resolution of uncertainty: The international evidence," Journal of Banking & Finance, Elsevier, vol. 24(10), pages 1575-1604, October.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_2177. 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: (Julio Saavedra)
If references are entirely missing, you can add them using this form.