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Do Markets Care Who Chairs the Central Bank?

Author

Listed:
  • Kenneth N. Kuttner

    (Oberlin College, Department of Economics)

  • Adam S. Posen

    (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.

Suggested Citation

  • 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.
  • Handle: RePEc:iie:wpaper:wp07-3
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    References listed on IDEAS

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    More about this item

    Keywords

    Central banking; Monetary policy; Credibility; Financial markets; Event study analysis;
    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
    • 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; Insider Trading

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