Foreign Exchange Intervention and the Political Business Cycle: A Panel Data Analysis
Open access
Date
2007-04Type
- Working Paper
ETH Bibliography
yes
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Abstract
By combining expansionary open market operations with sales of foreign exchange, the central bank can expand the monetary base without depreciating the exchange rate. Thus, if there is a monetary political business cycle, sales of foreign exchange are especially likely before elections. Our panel data analysis for up to 146 countries in 1975-2001 supports this hypothesis. Foreign exchange reserves relative to trend GDP depend negatively on the pre election index. The relationship is significant and robust irrespective of the type of electoral variable, the choice of control variables and the estimation technique. Show more
Permanent link
https://doi.org/10.3929/ethz-a-005390255Publication status
publishedJournal / series
KOF Working PapersVolume
Publisher
KOF Swiss Economic Institute, ETH ZurichSubject
Political business cycles; Foreign exchange interventions; BUSINESS CYCLE; WECHSELKURS; EXCHANGE RATE; KONJUNKTURZYKLUSOrganisational unit
02525 - KOF Konjunkturforschungsstelle / KOF Swiss Economic Institute
Related publications and datasets
Is previous version of: http://hdl.handle.net/20.500.11850/125682
Notes
See also http://e-citations.ethbib.ethz.ch/view/pub:188308.More
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ETH Bibliography
yes
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