Uncertainty in a disaggregate model: A data rich approach using Google search queries

Author name: 
Shields K
Tran TD

This paper estimates the impact of uncertainty shocks in a disaggregate model featuring state-level unemployment and uncertainty, which is measured using Google search data. We show that the disaggregate model captures important spillover effects which a model using aggregate data would overlook resulting in significantly different peak responses and time dynamic effects. We find the effect of uncertainty shocks on state-level unemployment is recessionary and heterogeneous. The importance of national factors in propagating the effect of uncertainty is also heterogeneous across states, and overall less relevant than state-level factors. These heterogeneous effects are found to be related to state-specific industry compositions and the fiscal position.

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