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Electoral cycles in macroeconomic forecasts
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics, Uppsala Center for Fiscal Studies. CESifo; CIFREL; Univ Cattolica Sacro Cuore, Largo A Gemelli 1, I-20123 Milan, Italy.ORCID iD: 0000-0002-2390-8076
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics, Uppsala Center for Fiscal Studies. Sveriges Riksbank, Payments Dept, S-10337 Stockholm, Sweden.ORCID iD: 0000-0003-3099-3106
2022 (English)In: Journal of Economic Behavior and Organization, ISSN 0167-2681, E-ISSN 1879-1751, Vol. 202, p. 307-340Article in journal (Refereed) Published
Abstract [en]

This paper documents the existence of electoral cycles in GDP growth forecasts released by governments. In a theoretical model of political selection, we show that governments release overly optimistic GDP growth forecasts ahead of elections to increase the reelec-tion probability. The bias arises from lack of commitment if voters are rational and from manipulation of voters' beliefs if they do not expect the incumbent to be biased. Using high-frequency forecaster-level data from the United States, the United Kingdom, and Swe-den, we document that governments overestimate short-term real GDP growth by 0.1-0.3 percentage points.

Place, publisher, year, edition, pages
Elsevier, 2022. Vol. 202, p. 307-340
Keywords [en]
Electoral cycles, Political selection, Voting, Macroeconomic forecasting
National Category
Economics
Identifiers
URN: urn:nbn:se:uu:diva-484240DOI: 10.1016/j.jebo.2022.08.016ISI: 000848079600015OAI: oai:DiVA.org:uu-484240DiVA, id: diva2:1694988
Available from: 2022-09-12 Created: 2022-09-12 Last updated: 2023-08-25Bibliographically approved

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Cipullo, DavideReslow, André

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