Eich’s work is sure to be a landmark in political science. His argument is bold and ambitious; his writing clear and engaging; and his message timely, persuasive and imperative."—Erik Jones, Survival

H3: An increased probability of Trump being elected will lead to a decrease in the value of the peso. Empirical Approach

For librarians and administrators, your personal account also provides access to institutional account management. Here you will find options to view and activate subscriptions, manage institutional settings and access options, access usage statistics, and more. In addition, the timing of the election and the probability of Trump being elected affected how markets interpret tweets. Currency traders not only weighed the severity of Trump's proposed policies, but also his electoral prospects, which formed a proxy for the probability that Trump's policies would be implemented. In some parts of the election cycle, Hillary Clinton was assumed to have essentially won the election, and in other times Trump had a reasonable chance of capturing the presidency. His invective became a more serious threat to the Mexican economy when there was an increased risk of him using the power of the presidency to implement an anti-Mexico agenda. If Trump had a small chance of winning the presidency, then the tweet should have a smaller impact. If Trump had a larger chance of winning—or indeed, once he secured the presidency—the tweet can be treated as likely to be put forth as policy. In summary, the peso will be weakest when Trump has a higher probability of winning, strongest when he has a lower chance of winning, given that there is a greater expected chance that he will implement his policies. Identifying the motivations for currency policy preferences on the part of industries seeking to influence politicians, Jeffry Frieden shows how each industry’s characteristics—including its exposure to currency risk and the price effects of exchange rate movements—determine those preferences. Frieden evaluates the accuracy of his theoretical arguments in a variety of historical and geographical settings: he looks at the politics of the gold standard, particularly in the United States, and he examines the political economy of European monetary integration. He also analyzes the politics of Latin American currency policy over the past forty years, and focuses on the daunting currency crises that have frequently debilitated Latin American nations, including Mexico, Argentina, and Brazil. The book is readable for both economists and political scientists. I recommend Currency Politics to both sets of scholars. Economists will learn about the political aspects of exchange-regime choice and political scientists about the economic aspects."—Lawrence H. Officer, EH.Net Eich’s book is ultimately a call to revive democratic debate about money…this excellent book…does not tell us what to do, but he does show us something can be done."—Geoff Mann, New Statesman

The remainder of the paper outlines my theory about how foreign elections, and the policy risk they entail, should affect currencies, then tests the theory using data from currency markets. In the case of Mexico, I measure the average change in the value of the peso for tweets and find that the effect is strongest when Trump has the highest chance of winning (and thus when currency traders anticipated the highest probability that economic policy that would be harmful to Mexico would be implemented), as shown in figure 1. The causal mechanisms behind that effect are explained by both a signaling effect—the anticipated impact of economic policy on the value of the peso—and by the uncertainty regarding that policy becoming reality. Generalizing from the case examined in detail in this paper, one should expect other foreign electoral shifts to affect currency markets in close economic neighbors. It is important to note that the goal of this paper is not to measure and test the full universe of cases, but to highlight a previously overlooked phenomenon in the literature that reshapes our understanding of the determinants of currency markets, to rigorously test and measure that effect in one case in detail, and provide short case studies to supplement that core case. The theory and scope conditions discussed in the following section provide a framework for creating a set of testable hypotheses to examine this understudied phenomenon in other contexts beyond the cases highlighted in this paper. Theory and Causal Mechanisms Currency Politics: The Political Economy of Exchange Rate Policy. Jeffry A. Frieden. Princeton University Press. 2016. Tweets after Trump announces his presidential run, but before being selected as the nominee (47 tweets). Eich’s contribution demarcates a new space for political thought on money, and brings together key theorists on the structuration of money both to show that political thought often has a direct effect on the type of monetary system that is maintained, and to show that democratic agency vis-a-vis money is often wilfully ignored."—Dominic Burbidge, Politics and PoeticsThus, tweets signal two kinds of information that affect the Mexican peso: future US policy and the probability that those policies will be implemented, which are mediated by the perceived likelihood of Trump winning the election. On the latter point, the largest move in the peso came after Trump won the election—during which time no additional policy information was released, yet when new information about the probability of Trump being elected changed (from a relatively low probability to 100 percent, in a “surprise” outcome). Identifying the motivations for currency policy preferences on the part of industries seeking to influence politicians, Jeffry Frieden shows how each industry's characteristics—including its exposure to currency risk and the price effects of exchange rate movements—determine those preferences. Frieden evaluates the accuracy of his theoretical arguments in a variety of historical and geographical settings: he looks at the politics of the gold standard, particularly in the United States, and he examines the political economy of European monetary integration. He also analyzes the politics of Latin American currency policy over the past forty years, and focuses on the daunting currency crises that have frequently debilitated Latin American nations, including Mexico, Argentina, and Brazil. With deftness, elegance, and intellectual verve, Eich paints a vivid and compelling picture of the whole history of political and economic thought as revealed through an interrogation of money. It is clear that this insightful book announces a new and important voice in the field.” —David Singh Grewal, author of Network Power Este artículo examina los efectos de los impactos electorales extranjeros en los mercados de divisas. Presenta una teoría de la señalización y la incertidumbre para explicar por qué las elecciones en países con vínculos económicos estrechos deberían afectar las tasas de cambio. Metodológicamente, este artículo se centra en varios estudios de caso, con las elecciones de 2016 en Estados Unidos como caso central: se utiliza un marco de análisis de eventos para medir el impacto de las elecciones en el peso mexicano mediante la explotación de la exogeneidad plausible de los tuits de Donald Trump. También se miden los cambios en el peso utilizando la probabilidad prevista de que Trump gane las elecciones para demostrar que el peso es más débil cuando dicho candidato tiene la mayor probabilidad de ganar las elecciones. Además, se incluye una serie de análisis y comprobaciones de solidez de otros casos recientes notables en los que la incertidumbre electoral afectó las monedas de otros países, incluida la elección brasileña de 2018. Los resultados cuantifican el efecto de las elecciones extranjeras sobre los tipos de cambio, con base en la bibliografía existente que se centra en cómo las elecciones nacionales dan forma a los mercados de divisas. A modo de conclusión, se incluye un debate de la validez externa del fenómeno demostrado por los casos en el artículo, trazando futuras investigaciones sobre el tema y delineando formas de extender los hallazgos.