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THE ECONOMIC VOTING HYPOTHESIS IN THE PRESENCE OF THRESHOLD EFFECTS: EVIDENCE FROM ASYMMETRIC MODELING

THE ECONOMIC VOTING HYPOTHESIS IN THE PRESENCE OF THRESHOLD EFFECTS: EVIDENCE FROM ASYMMETRIC... The issue of asymmetry and nonlinearity in the context of economic voting was proposed as far back as the 1970s. The aim of this paper is to revisit the economic voting phenomenon by investigating the asymmetric cointegration between government popularity and economic conditions in Taiwan over the period from 1992 to 2007. We employ an advanced threshold autoregressive model and find strong evidence of threshold cointegration relationships between our observed variables. Furthermore, an asymmetric error correction model indicates that voters use different economic indicators to evaluate government popularity in different regimes and the speed of adjustment to the long-run equilibrium is more rapid in the lower regime and slower in the higher regime. Finally, the evidence shows that the economic voting behavior is supported by the presence of the threshold effects. Based on the nonlinear, asymmetric and threshold effects, we are able to provide several critical implications concerning the governance of the incumbent political party, particularly, in relation to the promotion of economic policy aimed at improving its popularity. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Singapore Economic Review World Scientific Publishing Company

THE ECONOMIC VOTING HYPOTHESIS IN THE PRESENCE OF THRESHOLD EFFECTS: EVIDENCE FROM ASYMMETRIC MODELING

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References (67)

Publisher
World Scientific Publishing Company
Copyright
Copyright ©
ISSN
0217-5908
eISSN
1793-6837
DOI
10.1142/S0217590813500045
Publisher site
See Article on Publisher Site

Abstract

The issue of asymmetry and nonlinearity in the context of economic voting was proposed as far back as the 1970s. The aim of this paper is to revisit the economic voting phenomenon by investigating the asymmetric cointegration between government popularity and economic conditions in Taiwan over the period from 1992 to 2007. We employ an advanced threshold autoregressive model and find strong evidence of threshold cointegration relationships between our observed variables. Furthermore, an asymmetric error correction model indicates that voters use different economic indicators to evaluate government popularity in different regimes and the speed of adjustment to the long-run equilibrium is more rapid in the lower regime and slower in the higher regime. Finally, the evidence shows that the economic voting behavior is supported by the presence of the threshold effects. Based on the nonlinear, asymmetric and threshold effects, we are able to provide several critical implications concerning the governance of the incumbent political party, particularly, in relation to the promotion of economic policy aimed at improving its popularity.

Journal

The Singapore Economic Review – World Scientific Publishing Company

Published: Mar 1, 2013

Keywords: Economic voting government popularity threshold autoregressive model threshold effect asymmetric vector error-correction

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