How do exchange rates respond to political rhetoric by populist leaders?

Cem Çakmaklı, Selva Demiralp and Gokhan Sahin Gunes ()
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Gokhan Sahin Gunes: BETAM, Bahcesehir University

Koç University-TUSIAD Economic Research Forum Working Papers from Koc University-TUSIAD Economic Research Forum

Abstract: With the global rise in authoritarianism, there has been an increase in political commentaries by the populist leaders that have criticized their central banks in favor of lower interest rates. We analyze the effects of these political pressures on exchange rates. We provide strong empirical evidence where political commentaries affect both the level and the volatility of exchange rate returns. The intensity of political pressures as well as institutional strength play a key role in determining the size of the impact.

Keywords: Political pressure; exchange rate; time inconsistency; populism. (search for similar items in EconPapers)
JEL-codes: E5 F31 G1 (search for similar items in EconPapers)
Pages: 76 pages
Date: 2021-08
New Economics Papers: this item is included in nep-isf, nep-mac and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:koc:wpaper:2112

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