POLITICS AND EXCHANGE RATES IN LATIN AMERICA

This paper examines the impact of presidential elections on exchange rate behavior for a group of thirteen Latin American countries for the period from 1972 to 1995. For each of thirty-four presidential elections, currency revaluation and exchange rate variability measures are compared for periods before, during and after the period of electoral activity. The empirical results suggest that presidential elections had little or no detectable impact on exchange rates in the majority of elections examined, but a statistically significant (and often substantial) relationship was found in an important minority of the elections. The impact of an election on currency values appears to vary substantially from election to election.