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- W1566236268 abstract "The relationships between the workings of democratic institutions and currency markets are studied. Severa competing propositions about how (re)equilibration affects currency markets are derived and tested. The results support the view that democratic politics affects currency markets. Expectations and uncertainty about electoral outcomes and government survival affect the probability of switching between currency-market equilibria. Additionally, opinion polls about chief executive performance have a direct effect on the probabilities of switches between currency regimes suggesting that these polls cause currency traders to revise their expectations about the stability of governments and (or) the contents of public policies. Electoral institutions mitigate the impact of politics on currency-market equilibria. Political effects are weaker in countries with proportional representation electoral systems than in countries with majority-plurality systems. There is less evidence that central-bank independence, consensual-corporatist systems, or political coherency reduces the effect of politics on currency markets. he study of democracy and markets is at the heart of economy. Understanding how equilibration and economic equilibration are related is one of the main challenges facing this field. The size and nature of currency markets make them especially important cases. Substantively, with globalization, currency markets have become important constraints on elected governments, reducing their room to maneuver. Analytically, in comparison to most goods markets, currency markets are efficient asset markets with distinctive equilibria: today's exchange rate is determined by currency traders' fully informed expectations about tomorrow's exchange rate. The sensitivity of these markets to the arrival of new information therefore makes them particularly well suited for studying the effects of news and uncertainty on economic equilibration.1 This article demonstrates there are informationally relevant factors insofar as exchange rate determination is concerned, factors that directly affect the transition probabilities between currency-market equilibria. Moreover, these factors vary in important ways across democracies. Some electoral institutions lessen the effects of politics on currency" @default.
- W1566236268 created "2016-06-24" @default.
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- W1566236268 date "2000-07-01" @default.
- W1566236268 modified "2023-09-25" @default.
- W1566236268 title "Democracy and Markets: The Case of Exchange Rates" @default.
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- W1566236268 doi "https://doi.org/10.2307/2669258" @default.
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