Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/235458 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 9088
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
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.
Subjects: 
electoral cycles
political selection
voting
macroeconomic forecasting
JEL: 
D72
D82
E37
H68
Document Type: 
Working Paper
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