Measuring State-level Economic Policy Uncertainty

50 Pages Posted: 7 Nov 2020 Last revised: 9 Jan 2021

See all articles by Redouane Elkamhi

Redouane Elkamhi

University of Toronto - Rotman School of Management

Chanik Jo

CUHK Business School

Marco Salerno

University of Toronto - Rotman School of Management

Date Written: September 18, 2020

Abstract

We develop 50 novel indices of State-level Economic Policy Uncertainty (SEPU) based on newspaper coverage frequency using 204 million state newspaper articles from January 1990 to December 2019. We assess the validity of our measures. Our SEPU indices vary counter-cyclically with respect to state-specific economic conditions, rise before close gubernatorial elections, and exhibit a large cross-sectional variation. We demonstrate that SEPU indices explain the cross-sectional variation in state-level GDP, employment, income as well as industry investment decisions. Our findings highlight the importance of economic policy uncertainty at the state level in addition to the nationwide level.

Keywords: State-Level Economic Policy Uncertainty Index, News-Based Uncertainty Measure, State-Level Business Cycles

JEL Classification: D80, G12, G18, L50

Suggested Citation

Elkamhi, Redouane and Jo, Chanik and Salerno, Marco, Measuring State-level Economic Policy Uncertainty (September 18, 2020). Available at SSRN: https://ssrn.com/abstract=3695365 or http://dx.doi.org/10.2139/ssrn.3695365

Redouane Elkamhi

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Chanik Jo

CUHK Business School ( email )

Cheng Yu Tung Building
12 Chak Cheung Street
Shatin, N.T.
Hong Kong

HOME PAGE: http://sites.google.com/view/chanik-jo/

Marco Salerno (Contact Author)

University of Toronto - Rotman School of Management ( email )

Toronto, Ontario M5S 3G8
Canada

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