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Presidential Cycles in the United States and the Dollar-Pound Exchange Rate: Evidence from over Two Centuries of Data

Author

Listed:
  • Rangan Gupta

    (Department of Economics, University of Pretoria, Pretoria, South Africa)

  • Mark E. Wohar

    (College of Business Administration, University of Nebraska at Omaha, Omaha, USA, and School of Business and Economics, Loughborough University, Leicestershire, UK.)

Abstract

In this paper, we analyze the impact of the U.S. presidential cycles on the dollar relative to the British pound over the longest possible monthly period of 1791:01 to 2018:10, based on an Exponential Generalized Autoregressive Conditional Heteroskedasticity (EGARCH) model. The usage of over two centuries of data controls for sample selection bias, while an EGARCH model accommodates for omitted variable bias. We find that over the entire sample period, the Democratic regime does indeed depreciate the dollar relative to the pound. However, when we identify structural breaks based on formal statistical analysis, we find that the full-sample result is primarily driven by the period covering 1827:01 to 1932:09, but in the recent period of 1932:10 to 2018:10, when Democrats have been in power, the dollar has in fact appreciated relative to the pound.

Suggested Citation

  • Rangan Gupta & Mark E. Wohar, 2018. "Presidential Cycles in the United States and the Dollar-Pound Exchange Rate: Evidence from over Two Centuries of Data," Working Papers 201874, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201874
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    References listed on IDEAS

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    More about this item

    Keywords

    Exchange Rate; U.S. Presidential Cycles;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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