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

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  • Cameron A. Shelton

    (Economics Department, Wesleyan University)

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.

Suggested Citation

  • Cameron A. Shelton, 2007. "The Information Content of Elections and Varieties of the Partisan Political Business Cycle," Wesleyan Economics Working Papers 2007-003, Wesleyan University, Department of Economics.
  • Handle: RePEc:wes:weswpa:2007-003
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    Cited by:

    1. Ferré, Montserrat & Manzano, Carolina, 2014. "Rational Partisan Theory with fiscal policy and an independent central bank," Journal of Macroeconomics, Elsevier, vol. 42(C), pages 27-37.
    2. Beckmann, Joscha & Schweickert, Rainer & Ahlborn, Markus & Melnykovska, Inna, 2020. "Drivers of Government Activity in European Countries: Do Partisan Politics Still Divide East and West?," Open Access Publications from Kiel Institute for the World Economy 230010, Kiel Institute for the World Economy (IfW).
    3. Markus Ahlborn & Rainer Schweickert, 2018. "Public debt and economic growth – economic systems matter," International Economics and Economic Policy, Springer, vol. 15(2), pages 373-403, April.
    4. Ahlborn, Markus & Schweickert, Rainer, 2018. "Public Debt and Economic Growth – Economic Systems Matter," EconStor Open Access Articles, ZBW - Leibniz Information Centre for Economics, pages 373-403.
    5. Fi̇li̇z Eryilmaz & Mehmet Mercan, 2015. "Political Budget Cycles: Evidence From Turkey," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 2, pages 5-14, April.
    6. Joscha Beckmann & Rainer Schweickert & Markus Ahlborn & Inna Melnykovska, 2020. "Drivers of Government Activity in European Countries: Do Partisan Politics Still Divide East and West?," Journal of Common Market Studies, Wiley Blackwell, vol. 58(5), pages 1235-1251, September.

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    More about this item

    Keywords

    political business cycle; varieties of capitalism; forecast data; opinion polls;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
    • P51 - Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems

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