Presidential Pressure on the Federal Reserve and U.S. State-Level Economic Policy Uncertainty

Onur Polat (), Rangan Gupta () and Christian Pierdzioch ()
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Onur Polat: Institute of Informatics, Hacettepe University, Beytepe Campus, 06800 Cankaya, Ankara, Turkiye
Rangan Gupta: Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa
Christian Pierdzioch: Department of Economics, Helmut Schmidt University, Holstenhofweg 85, P.O.B. 700822, 22008 Hamburg, Germany

No 202638, Working Papers from University of Pretoria, Department of Economics

Abstract: We examine whether presidential pressure on the Federal Reserve raises economic policy uncertainty (EPU) in the U.S. states. We use the news-based Fed–President Pressure Index (FPPI) developed by Bonaparte (2026) and monthly state-level EPU for the 50 states over 1987–2025 and estimate forward-sum local projections with a Swamy-random-coefficients panel estimator that allows the effect to differ across states. Our results indicate that presidential pressure raises the national, state, and composite components of state-level EPU on impact and over the following three months. On impact, the effect is positive in every state and significant in almost all states for the national and composite indexes. These short-run effects are robust to controlling for climate concern, to alternative timing and dynamics, and to standard errors that allow for cross-sectional dependence, whereas the effects at longer horizons are imprecisely estimated. The contemporaneous effect is about twice as large in states that are not politically aligned with the President, pointing to an alignment channel.

Keywords: Central bank independence; Presidential pressure; Federal Reserve; Economic policy uncertainty; U.S. states; Random-coefficients panel (search for similar items in EconPapers)
JEL-codes: C23 D72 D81 E52 E58 H70 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2026-10
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:202638

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