Exchange rate volatility: Does politics matter?

We examine the weekly volatility of the Japanese Yen, British Pound, German Mark and Canadian Dollar relative to the U.S. Dollar through five recent U.S. presidential terms. Our EGARCH-M model adds several new findings to the literature. Our results suggest that: 1) the volatility of all four exchan...

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Bibliographic Details
Published inJournal of macroeconomics Vol. 20; no. 2; pp. 351 - 365
Main Authors Lobo, Bento J., Tufte, David
Format Journal Article
LanguageEnglish
Published Detroit Elsevier Inc 01.04.1998
Elsevier
Wayne State University Press
Elsevier Science Ltd
SeriesJournal of Macroeconomics
Subjects
American dollar
Business cycles
Canadian dollar
Currency
Deutsche Mark
Dollar (Canadian)
Economic models
Economic policy
Economic structure
Elections
Exchange rates
Foreign exchange markets
Foreign exchange rates
Hypotheses
International relations
Macroeconomics
Political economy
Political power
Politicians
Politics
Pound sterling
Referendums
Stochastic models
Studies
Volatility
Voters
Yen
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Summary:We examine the weekly volatility of the Japanese Yen, British Pound, German Mark and Canadian Dollar relative to the U.S. Dollar through five recent U.S. presidential terms. Our EGARCH-M model adds several new findings to the literature. Our results suggest that: 1) the volatility of all four exchange rates is impacted by either the year in the electoral cycle and/or the political party in office; 2) past innovations exert an asymmetric impact on the conditional volatility of exchange rates, and 3) close to a U.S. election, an unexpected dollar depreciation impacts the volatility of the Yen and Mark significantly more than does an unexpected dollar appreciation.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0164-0704
1873-152X
DOI:10.1016/S0164-0704(98)00062-7