LAUSR

Abstract: The fact that scholars describe the response to the great recession as muted and moderate should motivate political scientists to study the economic vote from new angles. Hence, this study aims to investigate the compensating effect of falling interest rate expenditures on election outcomes because they usually fall when the economy slows down. To investigate this question, I use data from Swedish electoral districts between the years 2002 and 2014. I find that Swedish households reward local governments for falling interest rate expenditures. Moreover, this result is surprising because local politicians do not determine monetary policy and suggest that government can survive during harsh times because indebted households are compensated with lower interest rate expenditures when the degree of economic activity goes down.