PDFDownload paper RWP 19-04, June 2019

This paper examines how newspaper reporting affects government bond prices during the U.S. state default of the 1840s. Using unsupervised machine learning algorithms, the paper first constructs novel "fiscal information indices'' for state governments based on U.S. newspapers at the time. The impact of the indices on government bond prices varied over time. Before the crisis, the entry of new western states into the bond market spurred competition: more state-specific fiscal news imposed downward pressure on bond prices for established states in the market. During the crisis, more state-specific fiscal information increased (lowered) bond prices for states with sound (unsound) fiscal policy.

JEL Classification: E62, H30, N41

Article Citation

  • Bi, Huixin, and Nora Traum. 2019. “Sovereign Risk and Fiscal Information: A Look at the U.S. State Default of the 1840s.” Federal Reserve Bank of Kansas City, Research Working Paper no. 19-04, June. Available at External Linkhttps://doi.org/10.18651/RWP2019-04


Huixin Bi

Research and Policy Officer

Huixin Bi is a Research and Policy Officer in the Economic Research Department of the Federal Reserve Bank of Kansas City. Previously, Ms. Bi served as an economist at the Bank o…