Substantiating the Existence of Interest Group Pressures Toward Public-Policy Operation

Interest group pressures are always in force. Exchange rate policy, like any other public policy, might not be an exception to interest group politics, but its actual influence has gardly been tested. We use the US Input-Output Accounts to experimentally overcome the two main empirical obstacles for its verification - the "proxy problem" and the "Olson problem," as identified by Broz and Frieden (2001). Focusing especially on the yen-dollar real exchange rate in the 1980s, we discover that it was influenced by commodity-based exporters/importers groups within the US. Their pressures turn out to have worked with a quarter-lag, and in as asymmetric way, i.e., during downturns of exports or imports. Given the deeper empirical verification that the pressures intensified especially during the first half of the 1980s, we claim that the interest group pressure provides an additionally critical explanation for portraying the particularly "puzzling movement of the US dollar" over the period, surely enabling us to reconfirm the "competing nature in pressures" à la Becker (1983).