How did foreign exchange markets react to the 15th General Elections in Malaysia? Evidence from an Event Study

In this paper, we provide a detailed account of how foreign exchange markets reacted to the 15th Malaysian General Elections in 2022. This election was more complex than previous ones due to the increased plurality of political participation, where no single political coalition was dominant. As such, the election generated more uncertainty than usual. This provided an appropriate setting for an event study. Our results suggested that the Ringgit outperformed expectations relative to other foreign currencies. Hence, the market seemed to have ‘voted’ in favour of the new ruling regime, a view consistent with existing opinion polls. The results were also robust to alternative specifications and were not affected by confounding events.