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Do Financial Markets Respond to Populist Rhetoric?

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  • CEM ÇAKMAKLI
  • SELVA DEMİRALP
  • GÖKHAN ŞAHİN GÜNEŞ

Abstract

With the global rise in populism over the last decade, there has been an increase in political commentaries (PC) by leaders that criticize their central banks and argue for lower interest rates. We analyse the effects of PCs on exchange rates, bond yields, and the risk premium for six countries that are subject to political pressures. Utilizing a specification with time‐varying parameters, we show that PCs affect the level and the volatility of exchange rates, bond yields and the risk premium in Turkey. The response increases over time. In other countries, there is a significant impact on exchange rate volatility.

Suggested Citation

  • Cem Çakmakli & Selva Demi̇ralp & Gökhan Şahi̇n Güneş, 2024. "Do Financial Markets Respond to Populist Rhetoric?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 86(3), pages 541-567, June.
    • Handle: RePEc:bla:obuest:v:86:y:2024:i:3:p:541-567
    DOI: 10.1111/obes.12591
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