Blinder, Alan S., and Mark W. Watson. “Presidents and the US economy: An econometric
exploration.” American Economic Review 106.4 (2016): 1015-45.
https://pubs.aeaweb.org/doi/pdf/10.1257/aer.20140913
In this question, you will obtain and analyze the data used by Blinder and Watson.
Note: All of the questions below can be answered by taking simple averages in excel. You do not need to
run regressions (though you are welcome to do so if you are comfortable with regressions). You might
also find it convenient to work with Excel’s data summary modules such as Pivot Tables and Pivot Graphs
(but this is by no means required).
Though some of your analysis will be related to Blinder and Watson’s, all of your comments should be
based on your own calculations and analysis, not on your reading of their work. The purpose of this
assignment is to have you study these issues using your own independent analysis.
A. Download the data from FRED https://fred.stlouisfed.org/ to fill in the spreadsheet posted on
the course website. Briefly describe your procedure for finding the data you downloaded. For
the S&P 500 only, download the data from https://finance.yahoo.com/quote/%5EGSPC/
(which has a much longer time series). You do not have to hand in the spreadsheet itself.
B. Did the economy do better under Republicans or Democrats? Choose several measures from
the spreadsheet to use in this analysis, and justify your choices. Consider several different
choices for how to define who was in power, including the party of the President, the House,
and Senate majorities. Do these choices matter?
C. How robust are your conclusions from part B to including/dropping extreme economic events
(such as the Great Depression, Great Recession, Volcker disinflation, and the COVID crisis).
Does including vs. excluding the Trump era affect the results?
D. So far, you have studied the relationship between the party in power, and contemporaneous
economic outcomes. One could also study economic outcomes immediately before or after a
political party comes into power. Which do you think is most appropriate? Why?
E. What do you conclude regarding the causal effect of Democrats vs. Republicans on the
economy. How convincing is the evidence? Feel free to draw both on your own analysis and
on results from Blinder and Watson (2016) in your discussion.

DETAILED ASSIGNMENT

20200923063005assignment2