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April 29, 2026International Finance

Political Ideology, Exchange Rate and State History

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Authors

TNTu Nhu Nguyen

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Overview

Analysis reveals ideological distance influences exchange rates, suggesting potential implications for investor behavior.

Key Points

  • The research examines how political ideology affects exchange rates with a focus on ideological distance between investors and governments.
  • Utilized investor-level ideology measures combined with foreign-party ideology from electoral manifestos.
  • Analyzed data from 23 nations between 2000 to 2018.
  • Investigated the effect of ideological distance on currency values against the U.S. dollar.
  • Increase in ideological distance leads to a 2% appreciation of domestic currency against the U.S. dollar.
  • Findings suggest a causal relationship between political ideology changes and exchange rates.
  • Identified mechanisms related to institutional quality and state-history legacies.

Cite This Study

Tu Nhu Nguyen (2026) studied this question.

synapsesocial.com/papers/69f1547f879cb923c49449f2https://doi.org/10.1111/infi.70035
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