Elections, Political Polarization, and Economic Uncertainty

Scott Baker, Aniket Baksy, Nicholas Bloom, Steven Davis and Jonathan A. Rodden

No 27961, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine patterns of economic policy uncertainty (EPU) around national elections in 23 countries. Uncertainty shows a clear tendency to rise in the months leading up to elections. Average EPU values are 13% higher in the month of and the month prior to an election than in other months of the same national election cycle, conditional on country effects, time effects, and country-specific time trends. In a closer examination of U.S. data, EPU rises by 28% in the month of presidential elections that are close and polarized, as compared to elections that are neither. This pattern suggests that the 2020 US Presidential Election could see a large rise in economic policy uncertainty. It also suggests larger spikes in uncertainty around future elections in other countries that have experienced rising polarization in recent years.

JEL-codes: E0 (search for similar items in EconPapers)
Date: 2020-10
New Economics Papers: this item is included in nep-mac and nep-pol
Note: AP EFG ME POL PR
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Citations: View citations in EconPapers (30)

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Working Paper: Elections, Political Polarization, and Economic Uncertainty (2020)
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