The Effects of Uncertainty on Economic Conditions across US States: The Role of Climate Risks

Xin Sheng (), Rangan Gupta, Wenting Liao () and Oguzhan Cepni
Additional contact information
Xin Sheng: Lord Ashcroft International Business School, Anglia Ruskin University, Chelmsford, EK
Wenting Liao: School of Finance, Renmin University of China, Beijing, People's Republic of China

No 202410, Working Papers from University of Pretoria, Department of Economics

Abstract: We analyse the impact of uncertainty on the Economic Conditions Index (ECI) of the 50 US states in a panel data set-up, over the weekly period of the 3rd week of April 1987 to the 4th week of March 2023. Using impulse response functions (IRFs) from a linear local projections (LP) model, we show that uncertainty, as captured by the stochastic volatility (SV) of the ECIs, negatively impacts ECI in a statistically significant manner. More importantly, using a nonlinear LP model, the IRFs reveal that the adverse effect of uncertainty is significantly much stronger under the high-regime of climate risks when compared to the low-regime of the same. Understandably, our results have important policy implications.

Keywords: Economic conditions; Uncertainty; Climate risks; US states; Linear and nonlinear local projections models (search for similar items in EconPapers)
JEL-codes: C23 D80 E32 Q54 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2024-03
New Economics Papers: this item is included in nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.up.ac.za/media/shared/61/WP/wp_2024_10.zp249004.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:202410

Access Statistics for this paper

More papers in Working Papers from University of Pretoria, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Rangan Gupta ().