The Short-Term Effect of Election Polls on Foreign Exchange Rates: The 1988 Canadian Federal Election

Abstract

Polls do not simply measure public opinion; they also provide vital information that the public can use to form opinions and to make decisions. Using multiple regression analysis, the authors found that published polls had a powerful impact on the value of the Canadian dollar during the 1988 Canadian federal election. This appears to have been due to the unprecedented importance of economic issues in the federal campaign, the distinctive positions taken by the major political parties with respect to the U.S.-Canadian Free Trade Agreement, and to the proliferation of “horse-race” polls in the media. These results have implications for understanding the behavior of other elite groups, such as financial contributors and volunteer campaign workers, who may also use published horse-race polls to handicap election out comes.