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

MAGKS Joint Discussion Paper Series in Economics No. 46-2012

18 Pages Posted: 20 Nov 2012 Last revised: 2 Aug 2013

See all articles by Matthias Neuenkirch

Matthias Neuenkirch

University of Trier - Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: August 1, 2013

Abstract

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.

Keywords: central bank governors, credibility, inflation, monetary policy, reputation, Taylor rules

JEL Classification: E31, E43, E52, E58

Suggested Citation

Neuenkirch, Matthias, Establishing a Hawkish Reputation: Interest Rate Setting by Newly Appointed Central Bank Governors (August 1, 2013). MAGKS Joint Discussion Paper Series in Economics No. 46-2012. Available at SSRN: https://ssrn.com/abstract=2177829 or http://dx.doi.org/10.2139/ssrn.2177829

Matthias Neuenkirch (Contact Author)

University of Trier - Faculty of Economics ( email )

Universitätsring 15
Trier, 54296
Germany
+49 - (0)651 - 201 - 2629 (Phone)

HOME PAGE: http://www.uni-trier.de/index.php?id=50130

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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