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Exchange rate effects of US government shutdowns: evidence from both developed and emerging markets

journal contribution
posted on 01.09.2019, 00:00 authored by Susan SharmaSusan Sharma, D H Bach Phan, Paresh Narayan
We examine the exchange rate effects of US government shutdowns using historical exchange rate data covering 19 episodes of government shutdowns. We find that major currency exchange rates generally tend to appreciate vis-à-vis the US dollar, and foreign exchange volatility tends to increase in response to shutdowns. We show that the effect of shutdowns is felt most one day after a shutdown and the effect dies out for most currencies within five days of a shutdown. These results pass a range of robustness tests which control for day-of-the-week effects, model specifications, and the Global Financial Crisis.

History

Journal

Emerging markets review

Volume

40

Article number

100626

Pagination

1 - 15

Publisher

Elsevier

Location

Amsterdam, The Netherlands

ISSN

1566-0141

eISSN

1873-6173

Language

eng

Publication classification

C1 Refereed article in a scholarly journal

Copyright notice

2019, Elsevier B.V.