- Democratic Presidents: Inflation is over-estimated.
- Republican Presidents: Inflation is under-estimated.
In our paper we try to find out if this is just a coincidence or if inflation forecasts are really biased by the president's party identification. After running many different models we find that, yes Fed staff predict inflation will be higher than it actually is during Democratic presidencies and lower than it is during Republican presidencies.
This figure from the paper gives you a sense of how big we predict the inflation forecast errors will be under Republican and Democratic presidents.
Inflation is expected to be about 10% higher than it actually is during Democratic presidencies. It is expected to be about 20% lower than it actually is during Republican presidencies. I'll write another post describing how we made this graph and a few others in the paper.
Now for the slides from our ill-fated APSA presentation (you can find the full paper here):