Abstract:
In this paper, we analyze the impact of the U.S. presidential cycles on the dollar relative to the
British pound over the longest possible monthly period of 1791:01 to 2018:10, based on GJR
(or threshold generalized autoregressive conditional heteroscedasticity (GARCH)) model. The
usage of over two centuries of data controls for sample selection bias, while a GJR model
accommodates for omitted variable bias. We find that over the entire sample period, the
Democratic regime has indeed depreciated the dollar relative to the pound. However, during
the post Bretton Woods era, the depreciation of the dollar is not statistically significant under
the Democratic presidents.
