Economic Competence, Rational Expectations and Government Popularity in Post-War Britain

Simon Price and David Sanders

The Manchester School of Economic & Social Studies, 1994, vol. 62, issue 3, 296-312

Abstract: Economic theory suggests that government popularity may be related to the rate of change of economic quantities and the level of financial variables (like inflation or interest rates). Political theory suggests that this relationship may not be stable over time. The authors find that, although the data are inconsistent with the rational expectations hypothesis, there is a well-defined relationship between U.K. government popularity and a small set of economic variables (namely, unemployment, inflation, and real interest rates). Unusual political events are also important. Voters appear to discount past history at a high rate. The estimated equation passes a battery of stability tests. Copyright 1994 by Blackwell Publishers Ltd and The Victoria University of Manchester

Date: 1994
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Persistent link: https://EconPapers.repec.org/RePEc:bla:manch2:v:62:y:1994:i:3:p:296-312

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