In this paper we examine the relationship between economic and electoral outcomes in Canada since Confederation (1867) and the role that economic policy has played in influencing this relationship. The results are consistent with voter concern for the overall performance of the economy in the incumbent’s governing term—the average growth rate of per capita GDP and average unemployment rate—while rejecting the presence of a political business/budget cycle response in the period leading into an upcoming election. Evidence for the effect of performance on the stability of the political party system (as measured by party vote volatility) is even stronger. The data also are consistent with the use of policy for countercyclical stability (primarily through spending and deficits), fiscal response to voter turnout, the growth of both spending and deficits under larger governing majorities and compliant monetary response to fiscal deficits.

economic and electoral outcomes, political business cycle, political influences on policy, policy endogeneity, seemingly unrelated regressions
Fiscal Policies and Behavior of Economic Agents: General (jel H30), Macroeconomic Policy Formation, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook: General (jel E60)
Department of Economics
Carleton Economics Working Papers (CEWP)
Department of Economics

Ferris, J.S, & Voia, M.-C. (2019). Elections, Economic Outcomes and Policy in Canada: 1870 - 2015 (No. CEP 19-11). Carleton Economics Working Papers (CEWP). Department of Economics.