Voters and macroeconomics: Are they forward looking or backward looking? |
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Authors: | David J. Smyth Pami Dua Susan Washburn Taylor |
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Affiliation: | 1. Department of Economics, Louisiana State University, 70803, Baton Rouge, LA 2. Department of Economics, University of Connecticut, 06903, Stamford, CT 3. Department of Economics, Millsaps College, 39210, Jackson, MS
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Abstract: | The political business cycle hypothesis has been criticized on the grounds that it is impossible for governments to generate a vote winning boom because voters judge political candidates by the performance they expect in the future. In this paper, we directly test the hypothesis that voters are forward rather than backward looking. We compare the conventional view that presidential popularity depends on recently observed inflation and unemployment to three alternative models which assume varying forms of forward looking behavior. Non-tested hypothesis tests reject the forward looking models in favor of the one with the recent actual variables. |
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