Measuring State-level Economic Policy Uncertainty

Journal of Financial and Quantitative Analysis, forthcoming

90 Pages Posted: 7 Nov 2020 Last revised: 28 Apr 2023

See all articles by Redouane Elkamhi

Redouane Elkamhi

University of Toronto - Rotman School of Management

Chanik Jo

The Chinese University of Hong Kong (CUHK) - CUHK Business School

Marco Salerno

Healthcare of Ontario Pension Plan Trust Fund

Date Written: October 12, 2022

Abstract

We develop 50 indices of State-level Economic Policy Uncertainty (SEPU) based on newspaper coverage frequency using 204 million newspaper articles from March 1984 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 are associated with 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 (October 12, 2022). Journal of Financial and Quantitative Analysis, forthcoming, 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

The Chinese University of Hong Kong (CUHK) - CUHK Business School ( email )

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

Marco Salerno (Contact Author)

Healthcare of Ontario Pension Plan Trust Fund ( email )

1 York
Toronto, Ontario M5S 3G8
Canada

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