Quarterly Journal of Political Science > Vol 1 > Issue 1

Polls and Pounds: Public Opinion and Exchange Rate Behavior in Britain

William Bernhard, Department of Political Science, University of Illinois at Urbana-Champaign, Bernhard@uiuc.edu , David Leblang, Department of Political Science, University of Colorado, Leblang@colorado.edu
Suggested Citation
William Bernhard and David Leblang (2006), "Polls and Pounds: Public Opinion and Exchange Rate Behavior in Britain", Quarterly Journal of Political Science: Vol. 1: No. 1, pp 25-47. http://dx.doi.org/10.1561/100.00000004

Publication Date: 01 Jan 2006
© 2006 now Publishers
Comparative politics,  Political economy,  International political economy,  Public opinion


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In this article:
Foreign Exchange, Government Popularity and Expectations 
Data and Methodology 


This article examines the relationship between government popularity and exchange rate movements in Britain since 1987. It argues that: (1) unexpected drops in the government's public support lead to currency depreciations and increased exchange rate volatility, and (2) unanticipated depreciations hurt the government's public support. It estimates separate models of the exchange rate and government voting intention iteratively and recursively. At each iteration, measures of exchange rate and public opinion shocks are generated. These generated variables are employed in the next iteration of estimates, including measures of political shocks in the model of exchange rate behavior and measures of exchange rate movements in the model of voting intention. This enables, therefore, the measurement of both the political costs of currency depreciation and the exchange rate consequences of political competition.