Mass Attitudes and Financial Markets: Evidence from the 2022 Brazilian Election

• In Event: Politics of Sovereign Debt and International Finance

Abstract

Elections can be a source of political risk to investors, who worry about changes in government ideology and policy, especially in emerging market countries. Election campaigns may generate sharp increases in sovereign bond spreads, volatility in equity markets, and currency depreciation. In other instances, markets respond favorably to the electoral success of pro-business political candidates. While many scholars have considered how markets react to elections and government change, less attention has been paid to whether and how mass publics respond to these financial market events. We discuss two channels through which financial markets could affect mass attitudes and vote choices. First, if voters are worried about the state of the economy (for sociotropic or individual reasons), they may be particularly influenced by financial market assessments and reactions. Second, if voters view international investors as well-informed, voters may take cues from such economic elites. To the extent that either the material or the informational channel operates, financial market reactions to elections can matter not only for governments' financing costs, but also for candidates' electoral success. We explore these mechanisms using data from an original survey experiment with voters in Brazil fielded during the 2022 presidential election campaign.

Authors

• Sarah M. Brooks, Ohio State University

• Raphael Cunha, King's College London

• Layna Mosley, Princeton University