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U.S. Presidential Election Polls and the Economic Prospects of China and Mexico

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  • Hyeongwoo Kim
  • Madeline H. Kim

Abstract

Motivated by Mr. Trump's agendas against China and Mexico, we investigate how a candidate's probability of winning the U.S. presidential election affects the financial markets that are related to these countries. Unexpected increases in Trump's winning probability in the 2020 election generate significantly negative long-term effects on the home currency and the stock prices, while the default probability responds significantly positively in the long run. Similar responses, though in the short run, were observed when Mr. Biden's probability of winning increases, which dissipates quickly over time. We note that the responses to the Biden shock resemble those to the Trump shock during the 2016 election, implying that the probability shock of the new entrant candidate tends to create short-run disturbances in the financial market, whereas the probability shock of the incumbent candidate such as Trump in 2020 or Clinton in 2016 tends to stabilize financial markets in the short run.

Suggested Citation

  • Hyeongwoo Kim & Madeline H. Kim, 2020. "U.S. Presidential Election Polls and the Economic Prospects of China and Mexico," Auburn Economics Working Paper Series auwp2020-08, Department of Economics, Auburn University.
    • Handle: RePEc:abn:wpaper:auwp2020-08
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    File URL: https://cla.auburn.edu/econwp/Archives/2020/2020-08.pdf
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    1. Delia DiaconaÅŸu & Seyed Mehdian & Ovidiu Stoica, 2023. "The Global Stock Market Reactions to the 2016 U.S. Presidential Election," SAGE Open, , vol. 13(2), pages 21582440231, June.

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    More about this item

    Keywords

    Donald Trump; Joe Biden; Hillary Clinton; Incumbent Candidate; PredictIt; Financial market;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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