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The political timing of errors in inflation forecasts

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  • John Hill
  • Scott Smith

Abstract

Errors in inflation forecasts do not display a regular electoral rhythm over the entire post-war period. These results are consistent with the work of McCallum (1978) who explored a sample of similar length and failed to find an electoral pattern in unemployment rates. However, if unanticipated inflation is regarded as a lagging indicator of policy effectiveness, then the data do suggest that three of the four most recent administrations have enjoyed a certain success in manufacturing a pre-election upturn. The data also show a significant tendency for low popularity ratings to have been followed by a rise in unexpected inflation. For Democratic administrations, this response was no greater when voter disapproval was perceived in an election year than when it was observed over the general course of the Presidential term. For Republican administrations, however, there was more of a response in unexpected inflation to popularity ratings in an election year. Copyright Martinus Nijhoff Publishers 1985

Suggested Citation

  • John Hill & Scott Smith, 1985. "The political timing of errors in inflation forecasts," Public Choice, Springer, vol. 46(2), pages 215-220, January.
    • Handle: RePEc:kap:pubcho:v:46:y:1985:i:2:p:215-220
    DOI: 10.1007/BF00179742
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    References listed on IDEAS

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    1. Leroy Laney & Thomas Willett, 1983. "Presidential politics, budget deficits, and monetary policy in the United States; 1960–1976," Public Choice, Springer, vol. 40(1), pages 53-69, January.
    2. Lucas, Robert E, Jr, 1973. "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review, American Economic Association, vol. 63(3), pages 326-334, June.
    3. Frey, Bruno S & Schneider, Friedrich, 1978. "An Empirical Study of Politico-Economic Interaction in the United States," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 174-183, May.
    4. Thomas J. Sargent, 1973. "Rational Expectations, the Real Rate of Interest, and the Natural Rate of Unemployment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(2), pages 429-480.
    5. Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 76(4), pages 678-678.
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