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The long and large decline in state employment growth volatility

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  • Gerald Carlino
  • Robert DeFina
  • Keith Sill

Abstract

This study documents a general decline in the volatility of employment growth during the period 1960 to 2002 and examines its possible sources. A unique aspect of the analysis is the use of state-level panel data. Estimates from a pooled cross-section/time-series model indicate that aggregate and state-level factors each explain an important share of the total variation in state-level volatility. Specifically, state-level factors have contributed as much as 29 percent, while aggregate factors are found to account for up to 45 percent of the variation. With regard to state-level factors, the share of state total employment in manufacturing and state banking deregulation each contributed significantly to fluctuations in volatility. Among the aggregate factors separately identified, monetary policy, changes in the inventory-to-sales ratio, changes in the ratio of total trade to GDP, and oil prices significantly affected state-level volatility, although to differing degrees.

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Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 07-11.

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Date of creation: 2007
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Handle: RePEc:fip:fedpwp:07-11

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  16. 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, Society for Computational Economics 131, Society for Computational Economics.
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  23. Gerald Carlino & Robert DeFina & Keith Sill, 2003. "Postwar period changes in employment volatility: new evidence from state/industry panel data," Working Papers, Federal Reserve Bank of Philadelphia 03-18, Federal Reserve Bank of Philadelphia.
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  26. Hooker, Mark A., 1996. "What happened to the oil price-macroeconomy relationship?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 38(2), pages 195-213, October.
  27. Gerald Carlino & Robert DeFina, 1997. "The differential regional effects of monetary policy: evidence from the U.S. States," Working Papers, Federal Reserve Bank of Philadelphia 97-12, Federal Reserve Bank of Philadelphia.
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Cited by:
  1. 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, Society for Computational Economics 131, Society for Computational Economics.
  2. Steven J. Davis & James A. Kahn, 2008. "Interpreting the Great Moderation: changes in the volatility of economic activity at the macro and micro Levels," Staff Reports, Federal Reserve Bank of New York 334, Federal Reserve Bank of New York.
  3. Steven J. Davis & James A. Kahn, 2007. "Macroeconomic implications of changes in micro volatility," Proceedings, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue Nov.
  4. Owyang, Michael T. & Rapach, David E. & Wall, Howard J., 2009. "States and the business cycle," Journal of Urban Economics, Elsevier, vol. 65(2), pages 181-194, March.

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