(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; CEC Sailing Plan Workshop; Third Conference on Law and Macroeconomics (Virtual); University of Reading seminar

(2)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.

(3)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).

Presentation: 2020 American Accounting Association (AAA) annual meeting; 1st Guangdong-Hong Kong-Macao Area Research Forum on Business; the 8th International Conference on Futures and Other Derivatives; the 5th International Conference on Fintech Development; the Accounting and Business Research(ABR) and China Journal of Accounting Research(CJAR) Joint Conference

(4)Lobbying activity over business cycles

  Abstract: This study investigates how firms’ lobbying activities change over business cycles. Using data from the Center for Responsive Politics, we show that firms are more likely to participate in and incur greater expenditure on lobbying in times of recessions. Furthermore, non-lobbying firms are more likely to start lobbying during recessions. Wefurtherexplore two channels for this result: financial constraints and executive’s motivation. Because recession causes the external financing environment to deteriorate, we show that firms facing more constraints because of recessions lobby more. Moreover, executives have stronger motivation to lobby during recessions because doing so helps them to obtain more personal compensation.

Presentation: PhD-EVS seminar (scheduled)

© 2020 by Wei-Fong Pan. 

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