Journal Article

Partisan Impacts on the Economy: Evidence from Prediction Markets and Close Elections

Erik Snowberg, Justin Wolfers and Eric Zitzewitz

in The Quarterly Journal of Economics

Published on behalf of President and Fellows of Harvard University

Volume 122, issue 2, pages 807-829
Published in print May 2007 | ISSN: 0033-5533
Published online May 2007 | e-ISSN: 1531-4650 | DOI: https://dx.doi.org/10.1162/qjec.122.2.807
Partisan Impacts on the Economy: Evidence from Prediction Markets and Close Elections

Show Summary Details

Preview

Analyses of the effects of election outcomes on the economy have been hampered by the problem that economic outcomes also influence elections. We sidestep these problems by analyzing movements in economic indicators caused by clearly exogenous changes in expectations about the likely winner during election day. Analyzing high frequency financial fluctuations following the release of flawed exit poll data on election day 2004, and then during the vote count we find that markets anticipated higher equity prices, interest rates and oil prices, and a stronger dollar under a George W. Bush presidency than under John Kerry. A similar Republican-Democrat differential was also observed for the 2000 BushGore contest. Prediction market based analyses of all presidential elections since 1880 also reveal a similar pattern of partisan impacts, suggesting that electing a Republican president raises equity valuations by 2–3 percent, and that since Ronald Reagan, Republican presidents have tended to raise bond yields.

Journal Article.  0 words. 

Subjects: Economics

Full text: subscription required

How to subscribe Recommend to my Librarian

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content. subscribe or login to access all content.