Economic Insecurity and Voter Attitudes about Currency Crises
P1-01
Presented by: Selim Erdem Aytaç, David Steinberg
Currency crises have been the most common type of financial crisis in recent decades, but little is known about how the public views these events. This paper examines voters’ attitudes about rapid currency depreciation as well as their preferred policy responses. We argue that voters’ job insecurity strongly influences their attitudes about currency crises. Specifically, individuals with high degrees of j ob insecurity express stronger concern about currency depreciation, they are more opposed to orthodox policy responses such as raising the interest rate, and they are also more supportive of unorthodox policy responses, such as intensifying capital controls. Data from nationally representative surveys in two countries experiencing currency crises—Argentina and Turkey—support our argument. A follow-up survey experiment in Turkey, which randomly primed some respondents about deteriorating labor-market conditions, provides further evidence. This treatment influenced attitudes about currency depreciation, interest rate policy, and capital controls among the subset of individuals that are particularly vulnerable to job loss during a currency crisis—those with low education and low incomes. Overall, the results show that concerns about the labor market have a strong and systematic influence on how voters respond to currency crises.