The Information Content of Elections and Varieties of the Partisan Political Business Cycle

Cameron Shelton

No 2007-003, Wesleyan Economics Working Papers from Wesleyan University, Department of Economics

Abstract: This event study uses economic forecasts and opinion polls to measure the response of expectations to election surprise. Use of forecast data complements older work on partisan cycles by allowing a tighter link between election and response thereby mitigating concerns of endogeneity and omitted variables. I fin that forecasters respond swiftly and significantly to election surprise. I further argue that the response ought to vary across countries with different institutional foundations. In support, I find that there exist three distinct patterns in forecasters' responses to partisan surprise corresponding to Hall and Soskice's three varieties of capitalism. In liberal market economies, forecasters expect the left to achieve jobless growth with virtually no cost to inflation. In Mediterranean market economies, forecasters expect the left to achieve deliver both higher output growth and lower unemployment but with higher inflation. And in coordinated market economies, forecasters expect the left to deliver lower growth, higher unemployment, and higher inflation.

Keywords: political business cycle; varieties of capitalism; forecast data; opinion polls (search for similar items in EconPapers)
JEL-codes: E32 E63 P16 P51 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2007-04
New Economics Papers: this item is included in nep-for, nep-mac and nep-pol
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Related works:
Journal Article: The information content of elections and varieties of the partisan political business cycle (2012)
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