Economic Indicators and National Elections: An Analysis, Study notes of Geriatrics

Download Economic Indicators and National Elections: An Analysis and more Study notes Geriatrics in PDF only on Docsity! The Iowa Electronic Markets Macroeconomic Conditions: Measurement and Political Implications Economics Curriculum Using the IEM Presidential and Congressional Control Markets September, 2000 Learning Objectives Macroeconomic Conditions: Measurement and Political Implications Module Summary This module summarizes the relationship between macroeconomic conditions and national elections. Students will learn how economic data provide important information about the state of the economy, how to measure a variety of economic indicators, and how these indicators are related to national elections. In addition, students will apply their skills in using economic indicators to forecast election results and compare their results to other forecasting methods (polls, Iowa Electronic Markets) as well as actual election outcomes. Prior to implementing this module, instructors should:  Obtain and read the background information on Ray Fair’s Vote Predictions Model Source: fairmodel.econ.yale.edu/vote (with links to articles and the model)  Be familiar with the Iowa Electronic Markets Vote-Share Market (and/or Congressional Control Market) Sources: (1) biz.uiowa.edu/iem/news.html (articles on the vote-share market, e.g. see Business Week, November 11, 1996; Business Week, October 9, 2000); (2) biz.uiowa.edu/iem/about.html (e.g. see Wall Street Journal, August 28, 1995) Prior to this module, students should:  Be able to access the Web, go to specific Web sites, and download data  Be familiar with use of Excel spreadsheets to record data, compute simple algebraic functions (percent change), and graph results. 2 2.) Formulas 4. Economic Performance: The Historical Experience a. The Historical Experience: 1959-1999 b. How are we doing today relative to the historical experience? 5. Does Economic Performance Affect National Elections? a. Three tools 1.) Public Opinion Polls 2.) Iowa Electronic Markets 3.) Economic Models a.) Fairmodel b. Presidential Election 2000 Predictions (Oct. 1, 2000 Predictions) 1.) Polls (actual clippings) 2.) IEM (screen shot) 3.) FairModel (calculate/show the equation) c. Analysis 1.) How close were the three predictions to the actual results? 2.) Why were there prediction errors? What is missing? a.) Microeconomic factors b.) Other macroeconomic factors 6. Extension: Predicting Congressional Outcomes a. Lewis-Beck Model b. IEM Congressional Control Market 5 Lecture Notes Macroeconomic Conditions: Measurement and Political Implications Lecture notes are included as part of the Powerpoint presentation. 6 Powerpoint Slides Macroeconomic Conditions: Measurement and Political Implications See attached Powerpoint slides. 7 TABLE A Year and Quarter Nominal GDP (NGDP) (billions of $) Real GDP (RGDP) (billions of chained 1996 $) GDP Deflator (DEF) Growth Rate of GDP Deflator (%) Inflation Rate 1996 Q1 Not Applicable 1996 Q2 1996 Q3 1996 Q4 1997 Q1 1997 Q2 1997 Q3 1997 Q4 1998 Q1 1998 Q2 1998 Q3 1998 Q4 1999 Q1 1999 Q2 1999 Q3 1999 Q4 2000 Q1 2000 Q2 2000 Q3 2000 Q4 10 TABLE B Year and Quarter Real GDP (RGDP) (billions of chained 1996 $) Population (POP) (hundreds of thousands of people) Per Capita Real GDP (PCRGDP) Growth Rate of Per Capita Real GDP (%) 1996 Q1 Not Applicable 1996 Q2 1996 Q3 1996 Q4 1997 Q1 1997 Q2 1997 Q3 1997 Q4 1998 Q1 1998 Q2 1998 Q3 1998 Q4 1999 Q1 1999 Q2 1999 Q3 1999 Q4 2000 Q1 2000 Q2 2000 Q3 2000 Q4 11 Sources of Economic Data Nominal GDP Gross Domestic Product Billions of Dollars, Seasonally Adjusted Annual Rate Source: U.S. Department of Commerce, Bureau of Economic Analysis Source: http://www.stls.frb.org/fred/data/gdp/gdp Real GDP Real Gross Domestic Product Billions of Chained 1996 Dollars, Seasonally Adjusted Annual Rate Source: U.S. Department of Commerce, Bureau of Economic Analysis Source: http://www.stls.frb.org/fred/data/gdp/gdpc1 Population: Total Population: All Ages Including Armed Forces Overseas Thousands Source: U.S. Department of Commerce, Census Bureau Source: http://www.stls.frb.org/fred/data/employ/pop 2000 Poll Results: http://www.pollingreport.com/wh2gen.htm http://abcnews.go.com/sections/politics/PollVault/PollVault.html http://www.cnn.com/ELECTION/2000/resources/polls.html Gallup Presidential Job Approval Rating: Source: http://www.gallup.com/poll/trends/ptjobapp.asp Analysis of polling data including House and Senate control: Source: http://www.cookpolitical.com/ 12 Evaluation Questions Macroeconomic Conditions: Measurement and Political Implications Essay questions: 1. Briefly define and explain the followings: - Inflation rate - Unemployment rate - National economic growth rate - International trade deficit and surplus 2. Assume that the economy has experienced both high inflation and unemployment rates, what is the terminology used to represent this condition? During what period has this occurred? How does the combination of high inflation and unemployment affect the reelection of the current president for a second term? How about the reelection of senators and members of congress? 3. How is the inflation rate measured? What index is usually used to measure inflation? Why are high inflation rates are considered harmful? 4. Who is officially considered “unemployed”? How is the unemployment measured? What is meant by the natural rate of unemployment? 5. What is meant by the gross domestic production (GDP)? What is per capita GDP? Why is national economic growth measured by real per capita GDP? 6. Does the external economic relation of the nation (trade deficit/surplus and capital inflow and outflow) have any effect on the value of dollar in the foreign exchange market and on the economy as a whole? Is a continuous trade deficit combined with capital outflow an indication of change in economic condition or the overall productivity of the nation? 7. The Fair model is used as an example of economic models used for the prediction of an election. What are the general economic indicators used as variables in the Fair model? How does the model predict the election based on the economic conditions? 8. IEM political market has had a good record in predicting the national elections. The traders in IEM political market use their judgement about the economic conditions as well as the public opinion polls to guide their trades. Evaluate this statement. 9. What is the difference between consumer price index and the GDP deflator? 15 Multiple Choice Questions: 1. The U.S. experienced highest inflation during the: a. 1960s b. 1970s c. 1980s d. 1990s 2. During the 1990s, a. inflation increased and unemployment increased too b. inflation decreased and unemployment increased c. inflation increased and unemployment decreased d. inflation decreased and unemployment decreased too 3. Consumer price index is a measure of a. costs and prices. b. cost of purchased goods by manufacturers. c. intermediate goods prices. d. change in the market value of a basket of goods and services that a typical urban person (household) consumes. 4. Unemployed is officially defined as a. a person 16 years old or older who is not employed and has tried to find work during the last four weeks as recorded by the employment office b. a person who is retired or not working c. a person who has not been working at least three months d. a person who has not worked six months or more in the year. 5. National debt is created by a. excessive consumer spending b. accumulated annual government budget deficits not offset by government budget surpluses c. excessive surplus and low deficit spending d. accumulated of debts in the business sector 6. An increase in trade deficit combined with net capital outflow causes the value of dollar to a. increase in the foreign exchange market b. decrease in the foreign exchange market c. change only if the government sets a new rate d. none of the above 16 7. The U.S. gross domestic product is a. the total market value of the all final goods and services produced by factors of production located in U.S. during a year b. the total market value of savings and investments c. total values of goods produced by U.S. citizens in U.S. and abroad d. total value of production in the 48 contiguous states in U.S. 8. The Fair model as discussed in relation to IEM political markets can be used for prediction of a. the fair share of government expenditure as a percentage of GNP b. fairness of income distribution c. the vote share of Democratic presidential candidates in a national election d. fair share of business in political contributions for election. 17 Appendix B: Historical Macroeconomic Data Quarterly GDP Data: Nominal GDP Gross Domestic Product Billions of Dollars, Seasonally Adjusted Annual Rate, U.S. Department of Commerce, Bureau of Economic Analysis Source: http://www.stls.frb.org/fred/data/gdp/gdp Real GDP Real Gross Domestic Product Billions of Chained 1996 Dollars, Seasonally Adjusted Annual Rate, U.S. Department of Commerce, Bureau of Economic Analysis Source: http://www.stls.frb.org/fred/data/gdp/gdpc1 Year and Nominal Real Quarter GDP GDP 1996.1 7629.6 7676.4 1996.2 7782.7 7802.9 1996.3 7859.0 7841.9 1996.4 7981.4 7931.3 1997.1 8124.2 8016.4 1997.2 8279.8 8131.9 1997.3 8390.9 8216.6 1997.4 8478.6 8272.9 1998.1 8634.7 8404.9 1998.2 8722.0 8465.6 1998.3 8829.1 8537.6 1998.4 8974.9 8654.5 1999.1 9104.5 8730.0 1999.2 9191.5 8783.2 1999.3 9340.9 8905.8 1999.4 9559.7 9084.1 2000.1 9752.7 9191.8 2000.2 9945.7 9318.9 20 Monthly Population Data Total Population: All Ages Including Armed Forces Overseas, Thousands, U.S. Department of Commerce, Census Bureau Source: http://www.stls.frb.org/fred/data/employ/pop Year and Population Month 1996.01 264331 1996.02 264486 1996.03 264662 1996.04 264861 1996.05 265059 1996.06 265278 1996.07 265502 1996.08 265750 1996.09 265998 1996.10 266237 1996.11 266475 1996.12 266664 1997.01 266840 1997.02 267007 1997.03 267190 1997.04 267396 1997.05 267599 1997.06 267818 1997.07 268048 1997.08 268311 1997.09 268563 1997.10 268799 1997.11 269009 1997.12 269189 1998.01 269379 1998.02 269536 1998.03 269699 1998.04 269886 1998.05 270078 1998.06 270287 1998.07 270509 1998.08 270763 1998.09 271007 1998.10 271240 1998.11 271459 1998.12 271644 1999.01 271841 1999.02 271987 1999.03 272142 21 1999.04 272317 1999.05 272508 1999.06 272718 1999.07 272945 1999.08 273197 1999.09 273439 1999.10 273672 1999.11 273891 1999.12 274076 2000.01 274271 2000.02 274423 2000.03 274583 2000.04 274765 2000.05 274952 2000.06 275155 2000.07 275372 2000.08 275619 22 Ocober 2000 Contract Prices 10/01/00 DemVS 2 1.010 0.505 0.505 0.505 0.505 10/01/00 ReformVS 76 1.064 0.014 0.014 0.014 0.014 10/01/00 RepVS 54 26.470 0.490 0.491 0.490 0.490 10/02/00 DemVS 103 50.667 0.490 0.499 0.492 0.490 10/02/00 ReformVS 2,077 134.013 0.013 0.140 0.065 0.025 10/02/00 RepVS 300 146.945 0.483 0.490 0.490 0.483 10/03/00 DemVS 75 38.077 0.490 0.539 0.508 0.495 10/03/00 ReformVS 113 3.665 0.021 0.049 0.032 0.021 10/03/00 RepVS 154 73.892 0.473 0.489 0.480 0.489 10/04/00 DemVS 17 8.662 0.505 0.513 0.510 0.507 10/04/00 ReformVS 16 0.414 0.021 0.029 0.026 0.021 10/04/00 RepVS 13 6.198 0.468 0.480 0.477 0.478 10/05/00 DemVS 58 29.646 0.508 0.513 0.511 0.513 10/05/00 ReformVS 8 0.164 0.021 0.022 0.021 0.022 10/05/00 RepVS 22 10.508 0.470 0.478 0.478 0.470 10/06/00 DemVS 4 2.060 0.000 0.000 0.515 0.515 10/06/00 ReformVS 501 10.522 0.000 0.000 0.021 0.022 10/06/00 RepVS 66 31.042 0.472 0.472 0.470 0.472 10/07/00 DemVS 259 132.090 0.510 0.510 0.510 0.510 10/07/00 ReformVS 400 7.200 0.018 0.018 0.018 0.018 10/07/00 RepVS 4 1.904 0.476 0.476 0.476 0.476 10/08/00 DemVS 258 131.484 0.500 0.510 0.510 0.500 10/08/00 ReformVS 30 0.540 0.018 0.018 0.018 0.018 10/08/00 RepVS 20 9.490 0.471 0.487 0.475 0.471 10/09/00 DemVS 125 64.184 0.500 0.515 0.513 0.500 10/09/00 ReformVS 12 0.221 0.018 0.023 0.018 0.018 10/09/00 RepVS 19 9.186 0.480 0.487 0.483 0.487 10/10/00 DemVS 27 13.468 0.497 0.505 0.499 0.497 10/10/00 ReformVS 55 1.182 0.018 0.023 0.021 0.018 10/10/00 RepVS 29 14.100 0.481 0.487 0.486 0.487 10/11/00 DemVS 27 13.586 0.496 0.505 0.503 0.503 10/11/00 ReformVS 1,687 35.863 0.017 0.029 0.021 0.018 10/11/00 RepVS 12 5.864 0.484 0.490 0.489 0.484 10/12/00 DemVS 28 13.966 0.494 0.502 0.499 0.497 10/12/00 ReformVS 371 7.132 0.018 0.029 0.019 0.018 10/12/00 RepVS 33 16.073 0.485 0.489 0.487 0.489 10/13/00 DemVS 14 6.934 0.495 0.497 0.495 0.495 10/13/00 ReformVS 4 0.108 0.027 0.027 0.027 0.027 10/13/00 RepVS 1 0.489 0.489 0.489 0.489 0.489 10/14/00 DemVS 18 8.830 0.490 0.495 0.491 0.490 10/14/00 ReformVS 20 0.360 0.018 0.018 0.018 0.018 10/14/00 RepVS 163 80.967 0.489 0.499 0.497 0.499 10/15/00 DemVS 68 33.651 0.489 0.496 0.495 0.496 10/15/00 ReformVS 2,069 25.205 0.011 0.016 0.012 0.016 10/15/00 RepVS 14 6.886 0.488 0.498 0.492 0.498 10/16/00 DemVS 309 151.844 0.489 0.497 0.491 0.489 10/16/00 ReformVS 4 0.044 0.011 0.011 0.011 0.011 10/16/00 RepVS 40 19.818 0.492 0.498 0.495 0.498 10/17/00 DemVS 429 212.415 0.489 0.507 0.495 0.499 10/17/00 ReformVS 140 1.820 0.012 0.017 0.013 0.012 10/17/00 RepVS 487 242.550 0.492 0.503 0.498 0.503 10/18/00 DemVS 41 20.441 0.492 0.507 0.499 0.495 10/18/00 ReformVS 7 0.106 0.012 0.016 0.015 0.016 10/18/00 RepVS 27 13.365 0.493 0.502 0.495 0.493 25 10/19/00 DemVS 67 32.956 0.489 0.498 0.492 0.490 10/19/00 ReformVS 12 0.192 0.016 0.016 0.016 0.016 10/19/00 RepVS 59 29.164 0.493 0.499 0.494 0.499 10/20/00 DemVS 113 55.358 0.489 0.497 0.490 0.489 10/20/00 ReformVS 11 0.132 0.012 0.012 0.012 0.012 10/20/00 RepVS 3 1.497 0.493 0.499 0.499 0.493 10/21/00 DemVS 90 44.006 0.485 0.489 0.489 0.485 10/21/00 ReformVS 0 0.000 0.000 0.000 0.012 10/21/00 RepVS 0 0.000 0.000 0.000 0.493 10/22/00 DemVS 2 0.988 0.494 0.494 0.494 0.494 10/22/00 ReformVS 0 0.000 0.000 0.000 0.012 10/22/00 RepVS 19 9.481 0.499 0.499 0.499 0.499 The rest of the IEM data for the 2000 election will be added as it becomes available… 26