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Title:Do markets care about Central Bank governor changes? Evidence from emerging markets PDF Logo
Authors:Moser, Christoph
Dreher, Axel
Issue Date:2007
Series/Report no.:KOF working papers // Konjunkturforschungsstelle, Eidgenössische Technische Hochschule Zürich 177
Abstract: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.
Subjects:central bank governor turnover
monetary policy
emerging markets
risk premium
JEL:E58
E42
F30
G14
Persistent Identifier of the first edition:doi:10.3929/ethz-a-005474690
Document Type:Working Paper
Appears in Collections:KOF Working Papers, KOF Konjunkturforschungsstelle, ETH Zürich

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