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

Susan Sunila Sharma, Dinh Hoang Bach Phan, Paresh Kumar Narayan

Research output: Contribution to journalArticleResearchpeer-review

10 Citations (Scopus)

Abstract

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.

Original languageEnglish
Article number100626
Number of pages15
JournalEmerging Markets Review
Volume40
DOIs
Publication statusPublished - Sep 2019
Externally publishedYes

Keywords

  • Exchange Rate
  • Government Shutdown
  • Volatility

Cite this