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Economic Competence, Rational Expectations and Government Popularity in Post-War Britain

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  • Price, Simon
  • Sanders, David

Abstract

Economic theory suggests that government popularity may be related to the rate of change of economic quantities and the level of financial variables (like inflation or interest rates). Political theory suggests that this relationship may not be stable over time. The authors find that, although the data are inconsistent with the rational expectations hypothesis, there is a well-defined relationship between U.K. government popularity and a small set of economic variables (namely, unemployment, inflation, and real interest rates). Unusual political events are also important. Voters appear to discount past history at a high rate. The estimated equation passes a battery of stability tests. Copyright 1994 by Blackwell Publishers Ltd and The Victoria University of Manchester

Suggested Citation

  • Price, Simon & Sanders, David, 1994. "Economic Competence, Rational Expectations and Government Popularity in Post-War Britain," The Manchester School of Economic & Social Studies, University of Manchester, vol. 62(3), pages 296-312, September.
  • Handle: RePEc:bla:manch2:v:62:y:1994:i:3:p:296-312
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    Cited by:

    1. Malley, Jim & Philippopoulos, Apostolis & Woitek, Ulrich, 2007. "Electoral uncertainty, fiscal policy and macroeconomic fluctuations," Journal of Economic Dynamics and Control, Elsevier, vol. 31(3), pages 1051-1080, March.
    2. George Economides & Jim Malley & Apostolis Philippopoulos & Ulrich Woitek, 2003. "Electoral Uncertainty, Fiscal Policies and Growth: Theory and Evidence from Germany, the UK and the US," Working Papers 2003_16, Business School - Economics, University of Glasgow.

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