It’s all ‘bad’ news! Voters’ perception of macroeconomic policy competence

The purpose of the present paper is to consider how voters form perceptions about macroeconomic policy competence by focusing on the role of recent macroeconomic news: Do their perceived views of good news matter as much as bad news when they form beliefs about the incumbent government’s competence in managing the macroeconomy, in particular, with regard to their ability to control inflation and unemployment? We find that ‘bad’ news about unemployment persists when households are forming their perceived competence, whereas “good” news does not. That is, voters tend to display pessimistic bias when forming perceptions about the incumbent government’s competence