Establishing a Hawkish Reputation: Interest Rate Setting by Newly Appointed Central Bank Governors

Establishing a Hawkish Reputation: Interest Rate Setting by Newly Appointed Central Bank Governors

In this paper, we explore the interest rate setting behavior of newly appointed central bank governors. We use the Kuttner and Posen (2010) sample, which covers 15 OECD countries, and estimate an augmented Taylor (1993) rule for the period 1974–2008. We find, first, that newly appointed governors fi...

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Vydáno v:MAGKS - Joint Discussion Paper Series in Economics (Band 46-2012)
Hlavní autor: Neuenkirch, Matthias
Médium: Arbeit
Jazyk:angličtina
Vydáno: Philipps-Universität Marburg 2012
Témata:
reputation, Taylor rules.
credibility
Central bank governors
monetary policy
inflation
Wirtschaft
Economics
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Shrnutí:In this paper, we explore the interest rate setting behavior of newly appointed central bank governors. We use the Kuttner and Posen (2010) sample, which covers 15 OECD countries, and estimate an augmented Taylor (1993) rule for the period 1974–2008. We find, first, that newly appointed governors fight inflation more aggressively during the first four to eight quarters of their tenure in an effort to establish a reputation for being inflation averse. Second, we find a significantly stronger reaction to inflation by newly appointed governors working within monetary policy frameworks comprised of an at least partly independent central bank and an explicit nominal anchor.
ISSN:1867-3678
DOI:10.17192/es2024.0159

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