Abstract
Economic stress indices are used to monitor business cycle conditions in several regions. Although the deployment of these tools is spreading, there have been relatively few efforts to empirically assess the performance of these gauges, especially at the regional level. This study takes advantage of one such index that is published monthly and has more than 15 years of historical data. Results obtained confirm an inverse relationship between household economic duress and retail sales activity, but it is not found to be statistically reliable over the long-run. Deviations from equilibrium are found to last for 142 months. More relevantly, a 1-point increase in the index is associated with a $3.48 million decline in total commercial activity. Additional testing using data for other regions and/or economic variables appears warranted. Empirical analysis that examines additional potential short-run linkages for El Paso may also prove useful.
Highlights
The Misery Index for the United States national economy is designed to provide a measure of household economic difficulty
Household economic stress indices (HESI) are measures used to gauge levels of economic distress faced by households in different regions
This study examines potential linkages between one HESI and retail sales per capita (RSPC) in El Paso, Texas
Summary
The Misery Index for the United States national economy is designed to provide a measure of household economic difficulty. While there have been a number of studies that examine the performance of these types of measures for national economies (Tang and Lean, 2009; Hanke, 2014), comparatively little research of this nature has been conducted for regional economies This effort attempts to partially fill that gap in the applied economics literature paper by estimating a household economic stress index for the El Paso metropolitan economy (HESI). In addition to calculating monthly values for HESI, empirical analysis is used to quantify the relationship between the new index and local retail activity The latter is selected because regional commerce is likely to be directly impacted by changes in household economic tensity. A historical data appendix is included at the end of the study
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