Misplaced childhood: When recession children grow up as central bankers

A disaster always rings twice: Early life experiences and central bankers' reactions to natural disasters

“…We are thus able to confirm that our natural disasters' hypothesis is not confounding the effect of recessions. Combining the analysis of Farvaque et al (2020) and the present one thus leads us to the conclusion, mutadis mutandis (as the samples and periods are different over the two studies), that central bankers who have experienced recessions in their childhood tend to react in a more dovish way over policy rates, while natural disasters induce a more conservative reaction in terms of inflation control in the very short-run.…”

“…A second robustness check comes from the paper by Farvaque et al (2020), which indicates that central bankers are influenced in their decision by their early life experience of growing up in periods of recession. This raises the possibility that our variable of interest may be capturing other events that have affected central bankers in the formative years.…”

“…A related paper analyzes how much monetary policymaking by central bankers is influenced by their early experience of growing up in periods of recession (Farvaque et al, 2020). The central bankers who grew up during such recession episodes are found to be more willing to cut policy rates.…”

“…For policymakers, Bernile et al (2017) show that there is a non‐monotonic relation between the intensity of CEOs' early‐life exposure to fatal disasters and corporate risk‐taking (those who experience the extreme downside of disasters behave more conservatively), while Farvaque et al (2020) find that central bankers who have experienced recessions in their childhood (and, in particular, long recessions) tend to behave in a more dovish way, being more reluctant to increase policy rates than to cut them.…”

Once bitten, twice bold? Early life tragedy and central bankers’ reaction to COVID-19

“…More specifically, it has been shown that the background and careers of central bankers also matter to explain their behavior (see, e.g., Eichler and Lahner, 2013 , Farvaque et al., 2014 , Gohlmann and Vaubel, 2007 ). Moreover, a closely related paper shows that central bankers exposed to recessions in their early life tend to lower interest, as compared with their counterparts ( Farvaque et al., 2020 ).…”