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Does the @realDonaldTrump Really Matter to Financial Markets?

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  • Allyson L. Benton
  • Andrew Q. Philips

Abstract

Does the @realDonaldTrump really matter to financial markets? Research shows that new information about the likely future policy direction of government affects financial markets. In contrast, we argue that new information can also arise about the likely future government's resolve in following through with its policy goals, affecting financial markets as well. We test our argument using data on U.S. President Donald J. Trump's Mexico‐related policy tweets and the U.S. dollar/Mexican peso exchange rate. We find that Trump's Mexico‐related tweets raised Mexican peso volatility while his policy views were unknown as well as thereafter, as they signaled his resolve in carrying out his Mexico‐related agenda. By helping politicians disseminate policy information to voters, and since voters hold governments accountable for their policy performance, social media allows investors to gather information about the likely policy direction and policy resolve of government, especially those of newcomers whose direction and resolve are unknown.

Suggested Citation

  • Allyson L. Benton & Andrew Q. Philips, 2020. "Does the @realDonaldTrump Really Matter to Financial Markets?," American Journal of Political Science, John Wiley & Sons, vol. 64(1), pages 169-190, January.
    • Handle: RePEc:wly:amposc:v:64:y:2020:i:1:p:169-190
    DOI: 10.1111/ajps.12491
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    2. Marcus Noland & Gary Clyde Hufbauer & Tyler Moran & Sherman Robinson, . "Assessing Trade Agendas in the US Presidential Campaign," PIIE Briefings, Peterson Institute for International Economics, number PIIEB16-6, October.
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    2. Ghalke, Avinash & Sensarma, Rudra & Chakraborty, Sandip & Kakani, Ram Kumar, 2023. "Stock markets and economic uncertainty: Roles of legislative sessions and coalition strength," European Journal of Political Economy, Elsevier, vol. 78(C).
    3. Deari Fitim & Koku Paul Sergius, 2024. "Do Local Political Elections Affect Daily Stock Returns? Evidence from the Republic of North Macedonia's MBI10 Index," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 34(1), pages 98-116, March.
    4. Raphael Cunha & Andreas Kern, 2022. "Global banking and the spillovers from political shocks at the core of the world economy," The Review of International Organizations, Springer, vol. 17(4), pages 717-749, October.

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