(1)The Labour Market Effect of Fiscal Policy Uncertainty (Job Market Paper)

   Abstract: This study examines the effect of fiscal policy uncertainty (FPU) on job searches and labour demand in the United States. We first develop search-based job search indices and find that increased FPU leads to higher job search levels. However, rising FPU reduces labour demand as we observe that the number of online job postings by firms declines significantly in response to increasing FPU. The effect of FPU varies across different groups of individuals and regions, while also being subject to monetary policy stance. Labour market institutions are key to explain such differences. Lastly, FPU reduces matching efficiency in labour markets. These results are robust to alternative specifications and after isolating the effect of uncertainty from risk.

Presentation: CEC 5th Hangzhou seminar; University of Reading seminar

(2)Job search behaviour in the United States during the COVID-19 pandemic

   Abstract: This study examines the effect of the coronavirus disease (COVID-19) on U.S. job search activity by developing sectoral and state-level job search indices. We document that Covid-19 has a significantly negative effect on job search, and that this effect varies across sectors and regions, being stronger in the other services, the leisure and hospitality sector, the trade, transportation, and utilities sector, the manufacturing sector, and in the West and Midwest regions. We also explore policy effects and observe that they helped reduce the negative effect of COVID-19 on job searches. Our results also indicate that the lower job search activity is more a national, rather than region-specific, phenomenon. Overall, our study suggests that COVID-19 does influence job search activities.

(3)Measuring US Regional Economic Uncertainty (joint with Shixuan Wang, and James Reade)

   Abstract: This study constructs a set of new economic uncertainty (EU) indices for the United States based on the internet search volumes. Different from other existing measures, these indices shed light on the regional and local situations along with national EU. Based on these indices, it is observed that although overall state-level EU is highly synchronized, idiosyncratic state’s EU nonetheless exhibits large variations. Similar to aggregate EU, idiosyncratic state’s EU is generally countercyclical. There is also a spillover effect among US regions. Lastly, we show that idiosyncratic state’s EU foreshadows declines in aggregate employment and output.

(4)Public News and Market Liquidity: Evidence from the CDS Market (joint with Xinjie Wang, Shanxiang Yang, Jinfan Zhang, and Zhaodong (Ken) Zhong)

  Abstract: This paper examines the effects of public news releases on the market liquidity in one of the most important OTC derivative markets—the CDS market. We document that, at the time of news releases, the bid-ask spread is wider, the number of quotes is larger, and the number of dealers is greater. Earnings announcements have particularly strong effects on liquidity while credit ratings have no significant effects. Moreover, the bid-ask spread only increases on news release days and reverts to normal levels several days after news releases. Finally, the effect of news on liquidity is stronger for negative, fundamental, and unscheduled news, and is more pronounced among firms with higher information asymmetry. Our findings are consistent with models of rational trade in Kim and Verrecchia (1994).

(5)Measuring Economic Uncertainty in China (with Shixuan Wang and Xinjie Wang)


Abstract: This study develops a new economic uncertainty (EU) index based on Chinese newspapers by addressing the media coverage bias of existing measures. The developed index refines the existing methods of measuring uncertainty by taking special characteristics of China into consideration, which turns out to be aptly reflect historical risk events. Based on the constructed EU index, we firstly investigate how EU affects China’s macroeconomy. Consistent with economic literature, our results suggest that EU reduces aggregate output and employment. We further test whether a predictive relationship exists between real economic activities and uncertainty in both linear and nonlinear settings. The results suggest that uncertainty predicts fluctuations in economic activity and actual economic activity also predicts EU, but nonlinearly. Finally, we show that US uncertainty leads to uncertainty in China, implying that negative EU on the Chinese economy may be, to a certain extent, coming from the United States. The developed index will facilitate researchers to investigate problems involving EU, and our empirical results are insightful for policymakers to stabilize economy and financial markets in China.

© 2020 by Wei-Fong Pan. 

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