The effect of electing Donald Trump president on the currency market

Abstract

Its well known that election highly influences the society and its environment. In democratic countries elections are considered a very important event where everything can change in one night. Financial market is one of the markets that are highly influenced by any change especially by a presidential election. Lots of expectations were made about the effect of Donald trump winning the elections saying that Trump victory would hurt emerging market currencies as investors support for more protectionist .On November 8, 2016, Donald trump was elected president of the United States in a shocking victory against his democratic opponent Hillary Clinton. We will study the effect of electing Donald Trump as president of the U.S on three currencies, Mexican pesos, Canadian dollar and the Euro. We conducted a Dummy variable for two periods the trump election, the day that he took his office in the white house (January 20, 2017) on each currency. So we will have nine regressions. We will run a GARCH model for each currency using each period separately and well run a multivariate GARCH model too. Our findings should be helpful to see the real effect of this election on the financial market and the economy in general especially that Trump is making lots of new shocking decisions in this way we can at least predict the volatility of the currencies after each new decision.