Do Markets Care Who Chairs the Central Bank?

This paper assesses the impact of central bank governor appointments on exchange rates and bond yields using a new data set of announcements spanning 15 countries and 30 years. The results show that exchange rates exhibit a statistically significant response to the announcement of a new governor, especially when the appointee's identity was not anticipated. The reactions are especially pronounced for banks lacking either independence or a nominal anchor. New governors are not generally thought to lack credibility, however, as announcements generally do not cause exchange rate or bond yield movements signaling expectations of higher inflation or looser monetary policy.