State-Level Economic Policy Uncertainty

Scott Baker, Steven Davis and Jeffrey A. Levy

No 29714, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We quantify and study state-level economic policy uncertainty. Tapping digital archives for nearly 3,500 local newspapers, we construct three monthly indexes for each state: one that captures state and local sources of policy uncertainty (EPU-S), one that captures national and international sources (EPU-N), and a composite index that captures both. EPU-S rises around gubernatorial elections and own-state episodes like the California electricity crisis of 2000-01 and the Kansas tax experiment of 2012. EPU-N rises around presidential elections and in response to 9-11, Gulf Wars I and II, the 2011 debt-ceiling crisis, the 2012 fiscal cliff episode, and federal government shutdowns. Close elections elevate policy uncertainty much more than the average election. VAR models fit to pre-COVID data imply that upward shocks to own-state EPU foreshadow weaker economic performance in the state, as do upward EPU shocks in contiguous states. The COVID-19 pandemic drove huge increases in policy uncertainty and unemployment, more so in states with stricter government-mandated lockdowns.

JEL-codes: D80 E32 E66 G18 H70 R50 (search for similar items in EconPapers)
Date: 2022-02
New Economics Papers: this item is included in nep-cwa, nep-mac and nep-pol
Note: EFG LS PE POL
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

Published as Scott R. Baker & Steven J. Davis & Jeffrey A. Levy, 2022. "State-Level Economic Policy Uncertainty," Journal of Monetary Economics, .

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Journal Article: State-level economic policy uncertainty (2022)
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