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States and the business cycle

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  • Owyang, Michael T.
  • Rapach, David E.
  • Wall, Howard J.

Abstract

We model the US business cycle using a dynamic factor model that identifies common factors underlying fluctuations in state-level income and employment growth. We find three such common factors, each of which is associated with a set of factor loadings that indicate the extent to which each state's economy is related to the national business cycle. According to the factor loadings, there is a great deal of heterogeneity in the nature of the links between state and national economies. In addition to exhibiting geographic patterns, the closeness of state economies to the national business cycle is related not only to differences in industry mix but also to non-industry variables such as agglomeration and neighbor effects. Finally, we find that the common factors tend to explain large proportions of the total variability in state-level business cycles, although, again, there is a great deal of cross-state heterogeneity.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 65 (2009)
Issue (Month): 2 (March)
Pages: 181-194

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Handle: RePEc:eee:juecon:v:65:y:2009:i:2:p:181-194

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Web page: http://www.elsevier.com/locate/inca/622905

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Keywords: State business cycles Common factors;

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References

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Citations

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Cited by:
  1. Owyang, Michael T. & Piger, Jeremy & Wall, Howard J., 2013. "Discordant city employment cycles," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 43(2), pages 367-384.
  2. Magnusson, Kristin, 2009. "The Impact of U.S. Regional Business Cycles on Remittances to Latin America," Working Paper Series in Economics and Finance, Stockholm School of Economics 710, Stockholm School of Economics.
  3. Rapach, David E. & Strauss, Jack K., 2012. "Forecasting US state-level employment growth: An amalgamation approach," International Journal of Forecasting, Elsevier, Elsevier, vol. 28(2), pages 315-327.
  4. Strauss, Jack, 2013. "Does housing drive state-level job growth? Building permits and consumer expectations forecast a state’s economic activity," Journal of Urban Economics, Elsevier, Elsevier, vol. 73(1), pages 77-93.
  5. Wall, Howard J., 2013. "The employment cycles of neighboring cities," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 43(1), pages 177-185.
  6. Chad R. Wilkerson, 2009. "Recession and recovery across the nation: lessons from history," Economic Review, Federal Reserve Bank of Kansas City, Federal Reserve Bank of Kansas City, issue Q II, pages 5-24.
  7. David Shepherd & Robert Dixon, 2010. "The not-so-great moderation? Evidence on changing volatility from Australian regions," Department of Economics - Working Papers Series, The University of Melbourne 1090, The University of Melbourne.

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