The Personal and Political Underpinnings of Economic Forecasts

Abstract

Recently, a great deal of attention has been focused on the impact of prospective evaluations of the economy on vote choice. Yet, little attention has been focused on the actual process whereby such evaluations are formed. This paper employs panel data to test a model of the formation of prospective evaluations of inflation and unemployment. Our findings indicate that retrospective assessments of economic conditions do not greatly influence economic forecasts. Instead, economic forecasts are shaped by personal economic circumstances and partisan assessments of governmental performance. The political implications of such findings are discussed.