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

journal contribution
posted on 31.03.2021, 05:38 by SS Sharma, Dinh Phan, PK Narayan
© 2019 Elsevier B.V. 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

Publication Date

01/01/2019

Journal

Emerging Markets Review

Volume

40

Article Number

100626

Pagination

15p.

Publisher

Elsevier

ISSN

1566-0141

Rights Statement

The Author reserves all moral rights over the deposited text and must be credited if any re-use occurs. Documents deposited in OPAL are the Open Access versions of outputs published elsewhere. Changes resulting from the publishing process may therefore not be reflected in this document. The final published version may be obtained via the publisher’s DOI. Please note that additional copyright and access restrictions may apply to the published version.

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