Henry W. Chappell

A New View of Political Accountability for Economic Performance

Most political support models imply that in evaluating economic performance, voters use a standard that would provide poor predictions of the future and leave the economy vulnerable to manipulation by vote-hungry politicians. Drawing on macroeconomic theory, we develop a simple standard of evaluation which encompasses a concern not only for current economic outcomes, but also for accurately assessed future consequences of current policies. We find that political support for the president can be explained as well by models that assume that voters use this sophisticated standard as by models that assume voter naivete.Our analysis questions the wisdom of measures typically used to assess voter evaluation of economic performance in a variety of theoretical contexts. The results also help to explain the absence of convincing evidence that governments exploit voter ignorance in manipulating the economy.

Partisan Monetary Policies: Presidential Influence Through the Power of Appointment

We investigate the channels through which partisan influence from a Presidential administration could affect monetary policy-making. Influence could be a result of direct Presidential pressure exerted on members of the Federal Open Market Committee (FOMC), or it could be a result of partisan considerations in Presidential appointments to the Board of Governors. To investigate these two channels of influence, we devise and apply a method for estimating parameters of monetary policy reaction functions that can vary across individual members of the FOMC. Our results suggest that the appointments process is the primary mechanism by which partisan differences in monetary policies arise.

POLICY MOTIVATION AND PARTY DIFFERENCES IN A DYNAMIC SPATIAL MODEL OF PARTY COMPETITION

We present a model of party competition that produces more realistic patterns of results than those often emphasized in the literature. Reversing Downs (1957), we assume that parties win elections in order to formulate policies, rather than formulate policies in order to win elections. Voters are modeled first as having perfect information about candidate positions, and then under conditions of uncertainty. In simulation experiments we show that policy motivation and voter uncertainty can bring about persistent and predictable party differences in sequential majority rule elections. As the degree of voter certainty decreases, parties diverge towards their optima, whereas increases in voter certainty draw parties towards cycles in which party positions vary, but predictable issue stances are maintained on the average.

Economics and elections in Western Europe : 1960-1997

This paper analyzes macroeconomic conditions and parliamentary election outcomes in 13 European countries over the 1960-1997 period. The analysis focuses on two themes. The first is that different macroeconomic theories imply that different economic indicators should be important for voters. The second is that political responsibility should condition voters’ responses to economic performance. We estimate a model in which indicators of economic performance and political responsibility interactively determine election outcomes. Performance measures suggested by alternative theories are included in empirical specifications. Results suggest that changes in inflation, especially when measured relative to the European average, have an impact on incumbents’ vote shares. The analysis fails to isolate political responsibility variables that condition the impact of economic performance on the vote, however.

Economic Performance, Voting, and Political Support: A Unified Approach

A presidential vote function and a presidential approval ratings function are jointly estimated for U.S. postwar observations. The estimation technique treats the two equations as seemingly unrelated regressions with unequal numbers of observations. Cross-equation restrictions implying that voters and poll respondents use identical standards in judging the economic performance of incumbents are imposed and tested. Estimates show that both votes and approval ratings are influenced by GNP growth and inflation. The results suggest that poll respondents are more inflation averse than voters; however, tests of this hypothesis are not conclusive. Copyright 1990 by MIT Press.

Aggregate Vote Functions for the U.S. Presidency, Senate, and House

In this paper, we estimate vote functions for presidential, House, and Senate elections in the United States using a seemingly unrelated regressions technique adapted to the case of unequal numbers of observations across equations. Our method facilitates rigorous comparisons of voting behavior across election types and provides efficiency gains over ordinary least squares. Our analysis focuses on comparisons across vote functions. We find that: (1) economic variables appear to influence outcomes in all election types, but they are more important in presidential elections than in House or Senate elections; (2) the hypothesis that voters attach equal relative weights to inflation and growth across election types cannot be rejected; (3) incumbency power affects both Senate and House elections but is more important in the House; (4) mid-term effects in House and Senate elections represent a penalty for the party controlling the presidency.

Welfare Consequences of the Six-Year Presidential Term Evaluated in the Context of a Model of the U.S. Economy

We evaluate the six-year presidential term proposal in the context of a model of the U.S. economy characterized by a short-run but not a long-run trade-off between inflation and unemployment. Votes and public welfare are separately conceptualized as functions of inflation and unemployment, which are indirectly controlled by the president through manipulation of government spending.In a series of simulation experiments, the vote-maximizing choice of policy instruments led to less we(fare loss with six- than with four-year terms under most conditions. Ironically, vote maximizing was shown to lead not only to short- and long-term welfare loss, but also to long-run political disadvantage.

The political viability of rule-based monetary policy*

6. ConclusionsWe have estimated two models explaining political support for the president as a function of economic performance. One model reflects the assumption characterizing most of the literature, that voters indiscriminately punish inflation and unemployment without regard to the tradeoffs between them. The other represents a more demanding conception of voter sophistication about macroeconomic possibilities and about control of the money supply. While the data do not unambiguously designate a ‘best’ model of behavior, the sophisticated voter hypothesis performs as well as the naive voter hypothesis in the context of our study. Clearly this result is subject to the usual econometric caveats including possible misspecification of the model, multicollinearity among independent variables, etc.. However, there is no particular reason to believe that these problems should favor one model as opposed to the other. Thus, while we cannot conclude that voters really think in terms of rates of growth of velocity and natural output, we can question the conventional wisdom that consistent rule-based monetary policies may not be politically viable.Our findings are somewhat reassuring in suggesting that the electoral process does not inevitably involve adverse incentives, as the political business cycle literature suggests that it does. However, the fact that the conventional naive voter model performs comparably well does illustrate that questions about the nature of electoral incentives in economic policy are far from resolved. Our claim is not to have provided a better explanation for patterns of political support, but rather to have conceptualized and tested an alternative to models which suggest that voters are vulnerable to cynical manipulation.

Taylor Rules for Sweden's Riksbank

Sweden lapsed into a severe recession in 2008 but, unlike other countries, had a rapid and robust recovery. Because of its unique recession experience, it provides a revealing case for investigating monetary policy responses to macroeconomic fluctuations. We estimate Taylor rules for the Riksbank and for selected individuals who have served on the Riksbank monetary policy committee. Using pre-recession data, our estimates suggest that monetary policy was highly inertial. Estimates for samples including recession and recovery observations reveal more active responses to macroeconomic conditions and weaker indications of inertia. A key feature of our econometric work is the use of a dynamic Tobit specification to account for the lower bound on nominal interest rates encountered during the recession. Comparing alternative empirical specifications for handling the lower bound sheds light on why monetary policy might be inertial.