Political Uncertainty and Macroeconomic Expectations of the General Public

Seminar abstract

While political uncertainty affects financial markets and businesses, its effect on consumers is not well understood. To capture a variation in political uncertainty, we consider the General Election in the UK in December 2019, which ultimately led to signing the Brexit deal between the EU and the UK and as such was crucial in the resolution of uncertainty about both the political power and the Brexit. We surveyed 1900 randomly chosen UK residents the day before and the day after the election about their views on inflation, interest rates and general economic conditions. The announcement of the election result improved economic outlook and certainty about it in line with the uncertainty resolution argument. However, its effect on perceptions and expectations of inflation and interest rates and on confidence in them is nil or close to that. After the election, the economic outlook of Labour supporters deteriorated, yet the nil election effect on interest rates and inflation depends neither on the party affiliation nor on the agenda (Leave or Remain). Jumps in political uncertainty may cause a swift response of broad economic outlook measures but do not suffice to move more specific beliefs. Remarkably, economic and political information is crucial for inflation and interest rate measures but is less relevant for the economic outlook. The latter appears more a psychological sentiment than an information-founded expectations measure.

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This seminar will be held online and is free to attend.

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Speaker bio

Dmitri Vinogradov graduated from Moscow State Lomonosov University in Math and from Higher School of Economics (Moscow) in Economics.

He received PhD in Economics from the University of Heidelberg (Germany), after which worked for 10 years at the Essex Business School (and its predecessor, the Department of Accounting, Finance and Management), prior to moving to the Adam Smith Business School of the University of Glasgow in 2017.

Dmitri’s research interests lie around the interaction of financial systems and wider society, with publications on banking, financial crises, policy interventions, and their effects on expectations, individual decision-making, well-being and inequalities, inter alia.