Electoral Cycles in Macroeconomic Forecasts

Arbeitspapier

This paper documents the existence of Political Forecast Cycles. In a theoretical model of political selection, we show that governments release overly optimistic GDP growth forecasts ahead of elections to increase the reelection 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 Sweden, we document that governments overestimate short-term GDP growth by 10 to 13 percent during campaign periods.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 9088

Classification and Topics

• Classification: Wirtschaft ; Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior ; Asymmetric and Private Information; Mechanism Design ; Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications ; Forecasts of Budgets, Deficits, and Debt
• Subject: electoral cycles ; political selection ; voting ; macroeconomic forecasting

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Cipullo, Davide ; Reslow, André
• Event: Veröffentlichung
• (who): Center for Economic Studies and Ifo Institute (CESifo)
• (where): Munich
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/235458
• Last update: 10.03.2025, 11:42 AM CET