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Co-movement of Australian State Business Cycles

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  • Thomas Walker
  • David Norman
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    Abstract

    We use a variety of techniques to examine the nature and degree of co-movement among Australian state business cycles. Our results indicate that these cycles move closely together, with particularly strong links between the cycles of the larger states. This finding is robust to a range of statistical measures. We also use an unobserved components model in an attempt to distinguish the sources of this comovement. While our results must be interpreted with caution given the limited amount of data available, they suggest that the major source of cyclical fluctuation in state activity is shocks that are common to all states. Region-specific shocks appear to have a moderate influence on cyclical fluctuations, while spillovers of such shocks from one state to another seem to play only a minor role. These findings are consistent with the results of recent studies for the United States, Canada and Europe, where common shocks have also been found to dominate regional cyclical activity

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    Bibliographic Info

    Paper provided by Econometric Society in its series Econometric Society 2004 Australasian Meetings with number 334.

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    Date of creation: 11 Aug 2004
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    Handle: RePEc:ecm:ausm04:334

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    Keywords: business cycles; concordance; unobserved components;

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    Cited by:
    1. Nalini Prasad & Anthony Richards, 2006. "Measuring Housing Price Growth – Using Stratification to Improve Median-based Measures," RBA Research Discussion Papers rdp2006-04, Reserve Bank of Australia.
    2. Viv Hall & John McDermott, 2008. "An Unobserved Components Common Cycle For Australia? Implications For A Common Currency," CAMA Working Papers 2008-11, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

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