Paolo Manasse, Graziano Moramarco, Giulio Trigilia
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引用次数: 0
Abstract
This paper studies the impact of political risk on exchange rates. We focus on the Brexit Referendum as it provides a natural experiment where both exchange rate expectations and a time-varying political risk factor can be measured directly. We build a portfolio model that relates changes in the Leave probability to changes of the British pound's market price, both via expectations and via a political risk factor. We estimate the model for multilateral and bilateral British pound exchange rates. We find that the Leave probability predicts a depreciation of the pound, consistent with the outcome post-referendum, and that the time-varying political risk affects exchange rates independently.
期刊介绍:
Economica is an international journal devoted to research in all branches of economics. Theoretical and empirical articles are welcome from all parts of the international research community. Economica is a leading economics journal, appearing high in the published citation rankings. In addition to the main papers which make up each issue, there is an extensive review section, covering a wide range of recently published titles at all levels.