Higher government spending linked to weaker currencies
Comparing Official exchange rate, LCU per USD, period average with General government final consumption expenditure (constant 2015 US$), per capita across 156 countries, 2022–2026.
- Rank correlation
- -0.62
- Holding size constant
- -0.48
- Countries compared
- 156
- Period
- 2022–2026
What might link these
A possible link between these indicators could be related to economic policies and their impact on exchange rates. However, a careful reader should be cautious about potential confounders such as inflation rates, which could influence both government spending and exchange rates. The relationship might also be driven by other underlying economic factors.
Why this is not proof of anything
This is a correlation across countries, not an experiment. It cannot show that either indicator causes the other, and both may simply follow a third thing. This correlation could mislead because it may not account for other economic factors that influence exchange rates, such as trade balances or monetary policy.
The second figure above repeats the measurement with national population and income held constant. It is the more conservative number: a relationship that largely disappears there was mostly telling you that larger, richer countries have more of most things.
How this was measured
Both indicators were ranked across every country reporting each, and the two rankings compared — ranks rather than raw values, because a handful of very large countries can otherwise manufacture a relationship on their own. The calculation is arithmetic over figures already published on this site; the commentary above is drafted from the two indicator names and the resulting coefficients.