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Partisan Impacts on the Economy: Evidence from Prediction Markets and Close Elections

Erik Snowberg, Justin Wolfers () and Eric Zitzewitz ()

No 12073, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Analyses of the effects of election outcomes on the economy have been hampered by the problem that economic outcomes also influence elections. We sidestep these problems by analyzing movements in economic indicators caused by clearly exogenous changes in expectations about the likely winner during Election Day. Analyzing high frequency financial fluctuations following the release of flawed exit poll data on Election Day 2004, and then during the vote count, we find that markets anticipated higher equity prices, interest rates and oil prices and a stronger dollar under a Bush presidency than under Kerry. A similar Republican-Democrat differential was also observed for the 2000 Bush-Gore contest. Prediction market based analyses of all Presidential elections since 1880 also reveal a similar pattern of partisan impacts, suggesting that electing a Republican President raises equity valuations by 2 3 percent, and that since Reagan, Republican Presidents have tended to raise bond yields.

JEL-codes: D72 E3 E6 G13 G14 H6 (search for similar items in EconPapers)
Date: 2006-03
Note: AP EFG POL
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Published as Snowberg, Erik, Justin Wolfers and Erik Zitzewitz. “Partisan Impacts on the Economy: Evidence from Prediction Markets and Close Elections.” Quarterly Journal of Economics 122, 2 (May 2007): 807-829.

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Related works:
Journal Article: Partisan Impacts on the Economy: Evidence from Prediction Markets and Close Elections (2007) Downloads
Working Paper: Partisan Impacts on the Economy: Evidence from Prediction Markets and Close Elections (2006) Downloads
Working Paper: Partisan Impacts on the Economy: Evidence from Prediction Markets and Close Elections (2006) Downloads
Working Paper: Partisan impacts on the economy: evidence from prediction markets and close elections (2006) Downloads
Working Paper: Partisan Impacts on the Economy: Evidence from Prediction Markets and Close Elections (2006) Downloads
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