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Presidential approval in Peru: an empirical analysis using a fractionally cointegrated VAR

Author

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  • Alexander Boca Saravia

    (Pontificia Universidad Católica del Perú
    Central Reserve Bank of Peru)

  • Gabriel Rodríguez

    (Pontificia Universidad Católica del Perú)

Abstract

Presidential approval in Peru depends on economic outcomes. However, voters are unable to distinguish between outcomes resulting from economic policies and those caused by exogenous external factors. Estimation results from seven Fractional Cointegrated VAR (FCVAR) models suggest that presidential approval increases with the monetary policy interest rate, the terms of trade, and manufacturing employment; and decreases with the nominal PEN/USD exchange rate and inflation volatility. Additionally, a Principal Components Analysis (PCA) conducted over a large set of macroeconomic indicators points to a greater influence of external over domestic factors in explaining presidential approval; i.e., economic outcomes that determine the dynamics of presidential approval are not under presidential control in Peru. It can be argued that these findings identify a significant source of political instability and a considerable challenge to democratic governance. To the authors’ best knowledge, this is the first application of fractional cointegration analysis to political economy in Latin America.

Suggested Citation

  • Alexander Boca Saravia & Gabriel Rodríguez, 2022. "Presidential approval in Peru: an empirical analysis using a fractionally cointegrated VAR," Economic Change and Restructuring, Springer, vol. 55(3), pages 1973-2010, August.
    • Handle: RePEc:kap:ecopln:v:55:y:2022:i:3:d:10.1007_s10644-021-09374-0
    DOI: 10.1007/s10644-021-09374-0
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    More about this item

    Keywords

    Economic voting; Fractional cointegration; Political economy; Macroeconomics; Latin America; Peru;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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