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State-Level Economic Policy Uncertainty


This paper examines 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 exposure to state and local sources of policy uncertainty (EPU-S), one that captures exposure to national 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. Closer elections bringer larger rises in policy uncertainty. The COVID-19 pandemic drove huge increases in policy uncertainty, especially from state-level sources. Cholesky-identified VARs show that upward innovations in state-level EPU foreshadow higher unemployment in the state and weaker economic activity.


Working Paper


Scott Baker, Steve Davis, Jeffrey Levy

Date Published



Baker, Scott, Steve Davis, and Jeffrey Levy. 2021. State-Level Economic Policy Uncertainty.


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