How Do Central Bank Governor Turnovers Affect Uncertainty and Lending Globally?

Abstract

In many economies, central bank governors serve fixed terms, implying predetermined turnovers while the successor's identity and policy stance remain unknown until shortly before appointment. We exploit this feature across 43 countries to study how turnovers affect global bank credit. Cross-border lending rises 11.8 percent before a turnover, while total lending is unchanged, indicating a reallocation. Policy rates are stable while economic policy uncertainty and interest rate volatility rise. Lending reverses once the new governor takes office. Effects are larger at central banks with supervisory authority. These findings isolate governor turnovers as a distinct, plausibly exogenous source of economic uncertainty.

Keywords: Turnovers, Cross-border Lending, Monetary Policy Uncertainty