Tariffs and the Exchange Rate: Evidence from Twitter

Dmitry Matveev and Francisco Ruge-Murcia

No 19-2020, Cahiers de recherche from Centre interuniversitaire de recherche en économie quantitative, CIREQ

Abstract: This paper examines Mundell's conjecture that in a flexible exchange rate regime, an increase in tariffs on foreign goods leads to the real appreciation of the local currency or, conversely, to the real depreciation of the foreign currency (Mundell, 1961). We focus on the exchange rate market's reaction to government communication in the form of tweets by the U.S. president that contain information about possible tariff increases on Canadian and Mexican goods. Results show that the anticipation of trade restrictions by the U.S. leads to a 0:022% depreciation in the Canadian dollar, and a 0:049% depreciation in the Mexican peso, with respect to the U.S. dollar.

Keywords: NAFTA; commercial policy; high-frequency identification (search for similar items in EconPapers)
JEL-codes: F13 F31 (search for similar items in EconPapers)
Date: 2020-09
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.cireqmontreal.com/wp-content/uploads/cahiers/19-2020-cah.pdf (application/pdf)

Related works:
Journal Article: Tariffs and the Exchange Rate: Evidence from Twitter (2024)
Working Paper: Tariffs and the Exchange Rate: Evidence from Twitter (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mtl:montec:19-2020

Access Statistics for this paper

More papers in Cahiers de recherche from Centre interuniversitaire de recherche en économie quantitative, CIREQ Contact information at EDIRC.
Bibliographic data for series maintained by Sharon BREWER ().