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Electoral Cycles in Macroeconomic Forecasts

Davide Cipullo and André Reslow ()

No 9088, CESifo Working Paper Series from CESifo

Abstract: This paper documents the existence of Political Forecast Cycles. In a theoretical model of political selection, we show that governments release overly optimistic GDP growth forecasts ahead of elections to increase the reelection probability. The bias arises from lack of commitment if voters are rational and from manipulation of voters’ beliefs if they do not expect the incumbent to be biased. Using high-frequency forecaster-level data from the United States, the United Kingdom, and Sweden, we document that governments overestimate short-term GDP growth by 10 to 13 percent during campaign periods.

Keywords: electoral cycles; political selection; voting; macroeconomic forecasting (search for similar items in EconPapers)
JEL-codes: D72 D82 E37 H68 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-cdm, nep-mac and nep-pol
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9088

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