The yield curve as an electoral bellwether

  • Berry B
  • Elliott E
  • Harpham E
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Abstract

Taking advantage of recent thinking about leading economic indicators, an electoral outcome model is constructed that allows for much earlier prediction than found in current models. The model is built in three stages. First, electoral outcome is expressed as a function of economic performance and voter approval in the manner of current forecasting models, although a different measure of economic performance is used. Second, economic performance and voter approval are modeled as functions of new economic bellwethers. Third, the products of steps one and two are combined in a simultaneous equation system that captures the indirect effects of the bellwethers on electoral outcome, permitting year-ahead forecasts of presidential elections that accurately predict outcomes except when random exogenous events such as the Kennedy assassination intervene.

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Authors

  • Brian J.L. Berry

  • Euel Elliott

  • Edward J. Harpham

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