Working Paper: NBER ID: w27961
Authors: Scott R. Baker; Aniket Baksy; Nicholas Bloom; Steven J. Davis; Jonathan A. Rodden
Abstract: We examine patterns of economic policy uncertainty (EPU) around national elections in 23 countries. Uncertainty shows a clear tendency to rise in the months leading up to elections. Average EPU values are 13% higher in the month of and the month prior to an election than in other months of the same national election cycle, conditional on country effects, time effects, and country-specific time trends. In a closer examination of U.S. data, EPU rises by 28% in the month of presidential elections that are close and polarized, as compared to elections that are neither. This pattern suggests that the 2020 US Presidential Election could see a large rise in economic policy uncertainty. It also suggests larger spikes in uncertainty around future elections in other countries that have experienced rising polarization in recent years.
Keywords: Economic Policy Uncertainty; Elections; Political Polarization
JEL Codes: E0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Elections (K16) | Economic Policy Uncertainty (EPU) (D89) |
| Close and polarized elections (D72) | Economic Policy Uncertainty (EPU) (D89) |
| 2020 U.S. presidential election (K16) | Economic Policy Uncertainty (EPU) (D89) |