Economic policy uncertainty and presidential approval: evidence from Latin America

Abstract

This paper analyzes the extent to which economic policy uncertainty affects presidential approval in four Latin American countries (Brazil, Chile, Colombia, and Mexico). Using panel (time-series cross-sectional) estimation methods, we show that economic policy uncertainty has a negative impact on presidential approval in our sample. A one-standard-deviation increase in the level of economic uncertainty reduces presidential approval by approximately 12 percent. Our results are consistent with the political economy model of Alesina et al. (1993), which shows that voters are less likely to re-elect the incumbent when faced with uncertainty about economic policy. Incumbent competence signalling can exarcerbate this effect.