Political administration effects and day-of-the-week effects in New Zealand's foreign exchange rate

Abstract

This study investigates the presence of political administration effects and day-of-the-week effects with New Zealand's trade-weighted foreign exchange index. The data covers six administrations during the period March 1985 to November 2000. The analysis, based on an orthogonal design, shows that changes in the index did not differ between Labour Party administrations and National Party (Conservative) administrations. One day-of-the-week effect, consistent with the settlement regime hypothesis, is observed. This effect, which differs between the two political administrations, disappears when the data is trimmed to ameliorate the impact of fat tails. The implication is that the effect is merely a reflection of the extreme cases.