The Economic Effects of Electoral Uncertainty: An Analysis of a Direct Measure of Uncertainty in Business' Economic Expectations During Pre- and Post-Election Periods in Germany, 1975-2000

Abstract

This paper - posted here as written for and presented at presentation at the 13th International Conference of Europeanists of the Council for European Studies at Palmer House, Chicago, 14-16 March 2002 - develops and tests a set of hypotheses about the effect of political uncertainty during pre- and post-election periods on the certitude with which respondents to business surveys hold their expectations about the business situation in a given country in the near future. Based on the technique for quantification of qualitative business survey responses developed by Gratz, Knobl, Carlson, and Parkin, I propose a way of measuring expectations uncertainty directly. Applying this method to survey data about the expected business situation from the ifo Konjunkturtest for Germany, I operationalize and test the argument for the German federal elections from 1976 to 1998. The hypotheses are broadly confirmed for 1976, 1980, 1983, and 1994; and partly confirmed for 1987, 1990, and 1998. Where the data seem to disconfirm the hypotheses, various aspects of the particular political context can explain this divergence, though such factors are outside the simple model presented here. The research presented in this paper is part of a larger project, my PhD dissertation, which investigates the influence of political factors on business confidence in advanced capitalist democracies. It seeks to systematize, theorize, and empirically test effects that are frequently assumed or treated anecdotally in the literature on international and comparative political economy.