Macroeconomic performance and government popularity in Britain: the short run dynamics

Abstract. Despite an extensive body of research on popularity function modelling there is little agreement about the magnitude and stability of effects. This is particularly true in the literature relating to Britain. The purpose of this paper is to specify and test a popularity function for Britain using the Box-Jenkins transfer function model building strategy. The model is estimated for the thirty-three year period between 1947 and 1980. This approach provides a particularly stringent test of causal links between the economy and political support. It demonstrates statistically significant links between unemployment, inflation and the devaluation of the currency, and the level of support for the incumbent party over the opposition party in the polls. However the links are not strong enough to provide an efficient forecasting model, and the effects are unstable over time. Generally the economic effects are related to the magnitude of unemployment and inflation.