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Business cycle phases in U.S. states

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  • Michael T. Owyang
  • Jeremy M. Piger
  • Howard J. Wall

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 indexes 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.

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Bibliographic Info

Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2003-011.

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Date of creation: 2004
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Publication status: Published in Review of Economics and Statistics, November 2005, 87(4), pp. 604-16
Handle: RePEc:fip:fedlwp:2003-011

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Keywords: Business cycles ; Regional economics;

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  1. 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.
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  8. Gerald Carlino & Keith Sill, 2000. "Regional income fluctuations: common trends and common cycles," Working Papers 00-8, Federal Reserve Bank of Philadelphia.
  9. Marcelle Chauvet & Jeremy M. Piger, 2003. "Identifying business cycle turning points in real time," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 47-61.
  10. John Geweke, 1991. "Evaluating the accuracy of sampling-based approaches to the calculation of posterior moments," Staff Report 148, Federal Reserve Bank of Minneapolis.
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  13. 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.
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  18. 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.
  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.
  20. Boldin Michael D., 1996. "A Check on the Robustness of Hamilton's Markov Switching Model Approach to the Economic Analysis of the Business Cycle," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 1(1), pages 1-14, April.
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  22. Chang-Jin Kim & Charles R. Nelson, 1999. "State-Space Models with Regime Switching: Classical and Gibbs-Sampling Approaches with Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262112388, December.
  23. 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.
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  25. 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.
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