Title

Elections and Economic Turbulence in Brazil: Candidates, Voters, and Investors

Document Type

Article

Publication Date

12-1-2006

Abstract

The relation between elections and the economy in Latin America might be understood by considering the agency of candidates and the issue of policy preference congruence between investors and voters. The preference congruence model proposed in this article highlights political risk in emerging markets. Certain risk features increase the role of candidate campaign rhetoric and investor preferences in elections. When politicians propose policies that can appease voters and investors, elections may have a limited effect on economic indicators, such as inflation. But when voter and investor priorities differ significantly, deterioration of economic indicators is more likely. Moreover, voter and investor congruence is more likely before stabilization, when an inverted Philips curve exists, as opposed to following stabilization, when a more traditional Philips curve emerges.

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