Our thanks go to seminar participants at the Bank of England, the Bank of Japan, Birkbeck College, the Federal Reserve Bank of Cleveland, the Liberal Arts Macro Workshop, the NBER, Oberlin College, the Reserve Bank of New Zealand, and the Zentrum für Europäische Wirtschaftsforschung; and to Barbara Craig, Simon Gilchrist, Pavel Kapinos, Peter Pedroni, and two anonymous referees for constructive suggestions. Dimitar Vlahov provided research assistance, and we are also grateful to Marta Abreu, Geoffrey Barrows, Özer Karagedikli, and Tarja Yrjola for their assistance with the data.
Do Markets Care Who Chairs the Central Bank?
Article first published online: 22 MAR 2010
© 2010 The Ohio State University Peterson Institute for International Economics
Journal of Money, Credit and Banking
Volume 42, Issue 2-3, pages 347–371, March - April 2010
How to Cite
KUTTNER, K. N. and POSEN, A. S. (2010), Do Markets Care Who Chairs the Central Bank?. Journal of Money, Credit and Banking, 42: 347–371. doi: 10.1111/j.1538-4616.2009.00290.x
- Issue published online: 22 MAR 2010
- Article first published online: 22 MAR 2010
- Received June 25, 2008; and accepted in revised form September 22, 2009.
- monetary policy;
- event study analysis;
- central bank independence
This paper assesses the impact of central bank governor appointments on exchange rates and bond yields using a new data set of announcements spanning 15 countries and 30 years. The results show that exchange rates exhibit a statistically significant response to the announcement of a new governor, especially when the appointee's identity was not anticipated. The reactions are especially pronounced for banks lacking either independence or a nominal anchor. New governors are not generally thought to lack credibility, however, as announcements generally do not cause exchange rate or bond yield movements signaling expectations of higher inflation or looser monetary policy.