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Strength of words: Donald Trump's tweets, sanctions and Russia's ruble

Dmitriy O. Afanasyev, Elena Fedorova and Svetlana Ledyaeva

Journal of Economic Behavior & Organization, 2021, vol. 184, issue C, 253-277

Abstract: We empirically test if the US President Donald Trump's rhetoric towards Russia (represented by his Russia-related tweets) affects ruble's exchange rate. Using three-stepped empirical framework, we find that escalation of negative sentiment of Trump's Russia-related tweets leads to ruble's depreciation (4–10%) in short-term periods (around 3 days). Though these episodes tend to coincide with imposition or announcement of US sanctions, we demonstrate that US sanctions that were not accompanied by negative tweets of Donald Trump, have not caused ruble's depreciation. This highlights the role of emotional factors in economic decision-making behavior.

Keywords: Exchange rate; Russian ruble; Donald Trump; Twitter; social media; sentiment analysis; elastic net; ARMAX-GARCH; Markov regime-switching model (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.jebo.2021.02.002

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Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

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