What is it about?
Political events consist of events of socioeconomic importance such as suspension of a Governor of a Central Bank - an event that impinges on the autonomy of the Central Bank (CBA) - or partisanship events such as postponement of elections. This study finds both CBA and partisanship events induce currency depreciation. While partisanship events induce uncertainties about currency valuations, however, CBA events induce profitability concerns among dealers that specialize in selling the currency of the country in question.
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Why is it important?
The extent to which a government's non-economic actions induce negative externalities for economic prices such as exchange rates or inflation ought to factor into the re electability of the government in question.
Perspectives
Study findings validate the theory that actions that impinge negatively on the autonomy of a Central Bank are detrimental to the health of an economy.
Dr Oghenovo A Obrimah
Fisk University
Read the Original
This page is a summary of: Asymmetric Responses of Investors within Foreign Exchange Markets to Political Events: Evidence from Nigeria, SSRN Electronic Journal, January 2015, Elsevier,
DOI: 10.2139/ssrn.2583250.
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