Working Paper: NBER ID: w13101
Authors: Kenneth N. Kuttner; Adam S. Posen
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.
Keywords: central bank; governor appointments; financial markets; monetary policy; event study
JEL Codes: E58; E61; G14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| central bank governor appointments (E58) | financial market expectations (G19) |
| unexpected appointments (I19) | changes in exchange rates (F31) |
| unexpected appointments (I19) | changes in bond yields (E43) |
| appointment announcements (M51) | market perceptions of monetary policy (E52) |