Abstract
We seek to determine whether a United States President’s job approval rating is influenced by the Misery Index. This hypothesis is examined in two ways. First, we employ a nonlinear model that includes several macroeconomic variables: the current account deficit, exchange rate, unemployment, inflation, and mortgage rates. Second, we employ probit and logit regression models to calculate the probabilities of U.S. Presidents’ approval ratings to the Misery Index. The results suggest that Layton’s model does not perform well when adopted for the United States. Conversely, the probit and logit regression analysis suggests that the Misery Index significantly impacts the probability of the approval of U.S. Presidents’ performances.
Highlights
“It’s the economy, stupid”, a statement famously coined by James Carville, campaign strategist to presidential candidate Bill Clinton’s 1992 U.S election campaign team, claimed that electoral success hinged on the performance of the United States economy
Does the economy matter? Are the political fortunes of U.S Presidents determined by changes in the components of the Misery Index? We are motivated to undertake this research for several reasons
The components of the misery index, i.e., unemployment and inflation rates, are included as explanatory variables, as in Layton (1992). This allows us to investigate the impact of the disaggregated misery index on the approval rate (APR) and provide more granular information on these critical variables
Summary
“It’s the economy, stupid”, a statement famously coined by James Carville, campaign strategist to presidential candidate Bill Clinton’s 1992 U.S election campaign team, claimed that electoral success hinged on the performance of the United States economy. The objective of this paper is to determine whether U.S Presidents’ job approval ratings are influenced by the rates of inflation and unemployment—the Misery Index. Layton (1992) estimated the degree that Australia’s community welfare was affected by a number of macroeconomic variables that included unemployment, inflation rate, current account deficit, and the exchange rate We extend this novel study by exploring the non-stationary properties of U.S data and seek to determine whether the model adopted by Layton (1992) is robust to non-stationary tests and analysis. We are not aware of any US study that has estimated the probability of electoral success of U.S Presidents (as measured by their job approval rating) based on the Misery Index or its components and a set of “standard” macroeconomic variables using probit analysis.
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