Presidential Approval in Peru: An Empirical Analysis Using a Fractionally Cointegrated VAR

Alexander Boca Saravia and Gabriel Rodríguez
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Alexander Boca Saravia: Departamento de Economía de la Pontificia Universidad Católica del Perú

No 2019-480, Documentos de Trabajo / Working Papers from Departamento de Economía - Pontificia Universidad Católica del Perú

Abstract: Presidential approval in Peru depends on economic outcomes. However, voters are unable to distinguish between outcomes resulting from economic policies and those caused by exogenous shocks. Estimation results from seven Fractional Cointegrated VAR (FCVAR) models suggest that presidential approval increases with the monetary policy interest rate, the terms of trade, and manufacturing employment; and decreases with the nominal PEN/USD exchange rate and ináation volatility. Additionally, a Principal Components Analysis (PCA) conducted over a large set of macroeconomic indicators points to a greater ináuence of external over domestic factors in explaining presidential approval; i.e., economic outcomes that determine the dynamics of presidential approval are not under presidential control in Peru. It can be argued that these Öndings identify a signiÖcant source of political instability and a considerable challenge to democratic governance. To the authorsíbest knowledge, this is the Örst application of fractional cointegration analysis to political economy in Latin America. JEL Classification-JEL: C32, D72

Keywords: Economic Voting; Fractional Cointegration; Political Economy; Macroeconomics; Latin America; Peru (search for similar items in EconPapers)
Pages: 37
Date: 2019
New Economics Papers: this item is included in nep-pol
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Journal Article: Presidential approval in Peru: an empirical analysis using a fractionally cointegrated VAR (2022)
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