We thank two anonymous referees and the editors, Robert DeYoung and Deborah Lucas, for helpful comments. Furthermore, we are grateful to Christian Bjørnskov, Ricardo Caballero, Christian Conrad, Etienne Farvaque, Martin Gassebner, Ashok Kaul, Silke Rath, Jan-Egbert Sturm, Dieter Urban, participants at the First BBQ Conference, the Verein für Socialpolitik, the KOF Research Seminar, the Verein für Socialpolitik: Research Committee Development Economics, the Central Banking Conference “Does Central Bank Independence Still Matter?” at the Bocconi University 2007, the Brown Bag Seminar at the University of Mainz, the Annual Meeting of the Austrian Economics Association (NOeG), the Macroeconomics Research Meeting 2007, and in particular Helge Berger for suggestions and discussion. We thank Simon Holzhammer, Stefan Keitel, Michaela Lischer, Elisabeth Münch, Nadja Pänzer, and Christoph Woodli for excellent research assistance; Jan Schopen for help in compiling the stock market and foreign exchange market data; and Hendrik van Broekhuizen for excellent proofreading.
Do Markets Care about Central Bank Governor Changes? Evidence from Emerging Markets
Article first published online: 25 NOV 2010
© 2010 The Ohio State University
Journal of Money, Credit and Banking
Volume 42, Issue 8, pages 1589–1612, December 2010
How to Cite
MOSER, C. and DREHER, A. (2010), Do Markets Care about Central Bank Governor Changes? Evidence from Emerging Markets. Journal of Money, Credit and Banking, 42: 1589–1612. doi: 10.1111/j.1538-4616.2010.00355.x
- Issue published online: 25 NOV 2010
- Article first published online: 25 NOV 2010
- Received October 26, 2007; and accepted in revised form July 12, 2010.
- central bank governor turnover;
- monetary policy;
- emerging markets;
- risk premium
Based on a new daily data set for 20 emerging markets over the period 1992–2006, we examine the reactions of foreign exchange markets, domestic stock markets, and sovereign bond spreads to central bank governor changes. We find that the replacement of a central bank governor negatively affects financial markets on the announcement day, which is in line with the hypothesis that newly appointed central bank governors suffer from a systematic credibility problem at the beginning of their tenure. We also find some evidence that changes in perceived central bank independence affect markets.