Electoral Cycles in Macroeconomic Forecasts

Abstract

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.

An economic topology of the Brexit vote

“…There are many complex reasons why voters behave as they do, with the influence of the media (Jackson et al, 2016) and social media in particular (Lopez et al, 2017;Gorodnichenko et al, 2018) being of high relevance. Messages received by voters are thus subject to a number of distortions, a problem which plagues even the most seemingly neutral sources and outwardly honest predictions of the future possibilities (Cipullo and Reslow, 2019). It is perhaps unsurprising that many turn to their families for advice; Fox et al ( 2019) study of parent-child behaviours shows a strong transmission of beliefs on Brexit between generations.…”

Opinion Polls, Turnout and the Demand for Safe Seats

“… Panel B of Figure A.6 focuses on the top ten publishers across the period under study.27 There are very few cases where two publishers are listed, I ignore those second publishers for simplicity.28 In the context of the Brexit referendum,Cipullo and Reslow (2019) find evidence of bias in macroeconomic forecasts released by institutions with stakes and influence.…”