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Business Cycle Phases in U.S. States

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Author Info
Michael T. Owyang (Federal Reserve Bank of St. Louis)
Jeremy Piger (Federal Reserve Bank of St. Louis)
Howard J. Wall (Federal Reserve Bank of St. Louis)

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Abstract

The U.S. aggregate business cycle is often characterized as a series of distinct recession and expansion phases. We apply a regime-switching model to state-level coincident indices to characterize state business cycles in this way. We find that states differ a great deal in the levels of growth that they experience in the two phases: Recession growth rates are related to industry mix, whereas expansion growth rates are related to education and age composition. Further, states differ significantly in the timing of switches between regimes, indicating large differences in the extent to which state business cycle phases are in concord with those of the aggregate economy. Copyright (c) 2005 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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File URL: http://www.mitpressjournals.org/doi/pdfplus/10.1162/003465305775098198
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Publisher Info
Article provided by MIT Press in its journal Review of Economics and Statistics.

Volume (Year): 87 (2005)
Issue (Month): 4 (01)
Pages: 604-616
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Handle: RePEc:tpr:restat:v:87:y:2005:i:4:p:604-616

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Sichel, Daniel E, 1994. "Inventories and the Three Phases of the Business Cycle," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(3), pages 269-77, July.
  2. Fratantoni, Michael & Schuh, Scott, 2003. " Monetary Policy, Housing, and Heterogeneous Regional Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(4), pages 557-89, August.
  3. repec:bep:sndecm:1:1996:1:35-46 is not listed on IDEAS
  4. Hansen, Bruce E, 1992. "The Likelihood Ratio Test under Nonstandard Conditions: Testing the Markov Switching Model of GNP," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(S), pages S61-82, Suppl. De. [Downloadable!] (restricted)
  5. Boldin, Michael D, 1994. "Dating Turning Points in the Business Cycle," Journal of Business, University of Chicago Press, vol. 67(1), pages 97-131, January. [Downloadable!] (restricted)
  6. Ellen R. Rissman, 1999. "Regional employment growth and the business cycle," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 21-39. [Downloadable!]
  7. Albert, James H & Chib, Siddhartha, 1993. "Bayes Inference via Gibbs Sampling of Autoregressive Time Series Subject to Markov Mean and Variance Shifts," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(1), pages 1-15, January.
  8. Diebold, Francis X & Rudebusch, Glenn D, 1996. "Measuring Business Cycles: A Modern Perspective," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 67-77, February. [Downloadable!] (restricted)
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  9. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March. [Downloadable!] (restricted)
  10. Gerald Carlino & Robert DeFina, 1997. "The differential regional effects of monetary policy: evidence from the U.S. States," Working Papers 97-12, Federal Reserve Bank of Philadelphia. [Downloadable!]
  11. John Geweke, 1991. "Evaluating the accuracy of sampling-based approaches to the calculation of posterior moments," Staff Report 148, Federal Reserve Bank of Minneapolis. [Downloadable!]
  12. Chauvet, Marcelle, 1998. "An Econometric Characterization of Business Cycle Dynamics with Factor Structure and Regime Switching," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 969-96, November.
  13. Harding, Don & Pagan, Adrian, 2002. "Dissecting the cycle: a methodological investigation," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 365-381, March. [Downloadable!] (restricted)
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  14. Quah, Danny T, 1996. "Aggregate and Regional Disaggregate Fluctuations," Empirical Economics, Springer, vol. 21(1), pages 137-59.
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  15. Chang-Jin Kim & Charles R. Nelson, 1998. "Business Cycle Turning Points, A New Coincident Index, And Tests Of Duration Dependence Based On A Dynamic Factor Model With Regime Switching," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 188-201, May. [Downloadable!] (restricted)
  16. Gerald Carlino & Keith Sill, 2001. "Regional Income Fluctuations: Common Trends And Common Cycles," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 446-456, August. [Downloadable!] (restricted)
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  17. Gerald Carlino & Robert Defina, 1998. "The Differential Regional Effects Of Monetary Policy," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 572-587, November. [Downloadable!] (restricted)
  18. James H. Stock & Mark W. Watson, 1989. "New Indexes of Coincident and Leading Economic Indicators," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 351-409 National Bureau of Economic Research, Inc. [Downloadable!]
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  19. Hamilton, James D., 1990. "Analysis of time series subject to changes in regime," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 39-70. [Downloadable!] (restricted)
  20. Don Harding & Adrian Pagan, 1999. "Knowing the Cycle," Melbourne Institute Working Paper Series wp1999n12, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne. [Downloadable!]
  21. Clark, Todd E, 1998. "Employment Fluctuations in U.S. Regions and Industries: The Roles of National, Region-Specific, and Industry-Specific Shocks," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 202-29, January. [Downloadable!] (restricted)
  22. Chang-Jin Kim & James Morley & Jeremy Piger, 2003. "Nonlinearity and the permanent effects of recessions," Working Papers 2002-014, Federal Reserve Bank of St. Louis. [Downloadable!]
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  23. Michael T. Owyang & Howard J. Wall, 2004. "Structural breaks and regional disparities in the transmission of monetary policy," Working Papers 2003-008, Federal Reserve Bank of St. Louis. [Downloadable!]
  24. Michael A. Kouparitsas, 2001. "Is the United States an optimum currency area? an empirical analysis of regional business cycles," Working Paper Series WP-01-22, Federal Reserve Bank of Chicago. [Downloadable!]
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    Other versions:
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Michael T. Owyang & David E. Rapach & Howard J. Wall, 2008. "States and the business cycle," Working Papers 2007-050, Federal Reserve Bank of St. Louis. [Downloadable!]
    Other versions:
  2. Howard J. Wall & Gylfi Zoega, 2003. "U. S. regional business cycles and the natural rate of unemployment," Working Papers 2003-030, Federal Reserve Bank of St. Louis. [Downloadable!]
    Other versions:
  3. Michael T. Owyang & Jeremy Piger & Howard J. Wall & Federal Reserve Bank of St. Louis, 2006. "A State-Level Analysis of the Great Moderation," Computing in Economics and Finance 2006 131, Society for Computational Economics. [Downloadable!]
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  4. Michael T. Owyang & Jeremy M. Piger & Howard J. Wall & Christopher H. Wheeler, 2007. "The economic performance of cities: a Markov-switching approach," Working Papers 2006-056, Federal Reserve Bank of St. Louis. [Downloadable!]
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  5. David Norman & Thomas Walker, 2004. "Co-movement of Australian State Business Cycles," RBA Research Discussion Papers rdp2004-09, Reserve Bank of Australia. [Downloadable!]
  6. Michael T. Owyang & Jeremy M. Piger & Howard J. Wall, 2005. "The 2001 recession and the states of the Eighth Federal Reserve District," Working Papers 2005-053, Federal Reserve Bank of St. Louis. [Downloadable!]
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  7. James D. Hamilton & Michael T. Owyang, 2009. "The propagation of regional recessions," Working Papers 2009-013, Federal Reserve Bank of St. Louis. [Downloadable!]
  8. Howard J. Wall, 2007. "Regional business cycle phases in Japan," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 61-80. [Downloadable!]
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  9. Claudia M. Buch & Martin Schlotter, 2008. "Regional Origins of Employment Volatility: Evidence from German States," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  10. Cletus C. Coughlin & Thomas A. Garrett & Rubén Hernández-Murillo, 2006. "Spatial dependence in models of state fiscal policy convergence," Working Papers 2006-001, Federal Reserve Bank of St. Louis. [Downloadable!]
  11. Rubén Hernández-Murillo & Michael T. Owyang, 2004. "The information content of regional employment data for forecasting aggregate conditions," Working Papers 2004-005, Federal Reserve Bank of St. Louis. [Downloadable!]
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  12. Michael Artis & Christian Dreger & Konstantin Kholodilin, 2009. "Common and Spatial Drivers in Regional Business Cycles," SERC Discussion Papers 0022, Spatial Economics Research Centre, LSE. [Downloadable!]
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  13. Michael A. Kouparitsas & Daisuke J. Nakajima, 2006. "Are U.S. and Seventh District business cycles alike?," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q III, pages 45-60. [Downloadable!]
  14. Chad R. Wilkerson, 2009. "Recession and recovery across the nation: lessons from history," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 5-24. [Downloadable!]
  15. Thomas Walker & David Norman, 2004. "Co-movement of Australian State Business Cycles," Econometric Society 2004 Australasian Meetings 334, Econometric Society. [Downloadable!]
  16. Dick van Dijk & Dennis Fok & Philip Hans Franses, 2005. "A multi-level panel STAR model for US manufacturing sectors," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(6), pages 811-827. [Downloadable!]
  17. Gary A. Wagner & Erick Elder, 2007. "How well are the states of the Eighth Federal Reserve District prepared for the next recession?," Regional Economic Development, Federal Reserve Bank of St. Louis, issue Nov, pages 75-87. [Downloadable!]
  18. Michael T. Owyang & Sarah Zubairy, 2009. "Who benefits from increased government spending? a state-level analysis," Working Papers 2009-006, Federal Reserve Bank of St. Louis. [Downloadable!]
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