State-level economic policy uncertainty

Scott R. Baker, Steven J. Davis*, Jeffrey A. Levy

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

18 Scopus citations


We quantify and study state-level economic policy uncertainty. Tapping digital archives for nearly 3500 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.

Original languageEnglish (US)
Pages (from-to)81-99
Number of pages19
JournalJournal of Monetary Economics
StatePublished - Nov 2022


  • COVID-19 pandemic
  • Elections and uncertainty
  • Home prices
  • Housing starts
  • Policy uncertainty
  • Spatial spillovers
  • State-level economic performance
  • Unemployment

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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