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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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Bibliographic Info

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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References

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  1. Michael T. Owyang & Jeremy M. Piger & Howard J. Wall, 2007. "A state-level analysis of the Great Moderation," Working Papers 2007-003, Federal Reserve Bank of St. Louis.
  2. George W. Hammond & Eric Thompson, 2004. "Employment Risk in U.S. Metropolitan and Nonmetropolitan Regions: the Influence of Industrial Specialization and Population Characteristics," Journal of Regional Science, Wiley Blackwell, vol. 44(3), pages 517-542.
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  5. Robert J. Gordon, 2005. "What Caused the Decline in U.S. Business Cycle Volatility?," NBER Working Papers 11777, National Bureau of Economic Research, Inc.
  6. Sylvain Leduc & Keith Sill, 2007. "Monetary Policy, Oil Shocks, and TFP: Accounting for the Decline in U.S. Volatility," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(4), pages 595-614, October.
  7. Chang-Jin Kim & Charles R. Nelson, 1999. "Has The U.S. Economy Become More Stable? A Bayesian Approach Based On A Markov-Switching Model Of The Business Cycle," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 608-616, November.
  8. Donald Morgan & Bertrand Rime & Philip E. Strahan, 2004. "Bank Integration and State Business Cycles," The Quarterly Journal of Economics, MIT Press, vol. 119(4), pages 1555-1584, November.
  9. Attaran, Mohsen, 1986. "Industrial Diversity and Economic Performance in U.S. Areas," The Annals of Regional Science, Springer, vol. 20(2), pages 44-54, July.
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  15. Christiano, Lawrence J. & Eichenbaum, Martin & Evans, Charles L., 1999. "Monetary policy shocks: What have we learned and to what end?," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 2, pages 65-148 Elsevier.
  16. 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.
  17. Hooker, Mark A., 1996. "This is what happened to the oil price-macroeconomy relationship: Reply," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 221-222, October.
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  20. Guerron Pablo A & Grennes Thomas J & Leblebicioglu Asli, 2011. "Economic Development and Heterogeneity in the Great Moderation among the States," The B.E. Journal of Macroeconomics, De Gruyter, vol. 11(1), pages 1-21, July.
  21. Richard Clarida & Jordi Galí & Mark Gertler, 2000. "Monetary Policy Rules And Macroeconomic Stability: Evidence And Some Theory," The Quarterly Journal of Economics, MIT Press, vol. 115(1), pages 147-180, February.
  22. Gerald Carlino & Robert DeFina & Keith Sill, 2003. "Postwar period changes in employment volatility: new evidence from state/industry panel data," Working Papers 03-18, Federal Reserve Bank of Philadelphia.
  23. Sylvain Leduc & Keith Sill & Tom Stark, 2002. "Self-fulfilling expectations and the inflation of the 1970s: evidence from the Livingston Survey," Working Papers 02-13, Federal Reserve Bank of Philadelphia.
  24. Hooker, Mark A., 1996. "What happened to the oil price-macroeconomy relationship?," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 195-213, October.
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  27. Hamilton, James D., 1996. "This is what happened to the oil price-macroeconomy relationship," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 215-220, October.
  28. Heather Anderson & Farshid Vahid, 2003. "The Decline in Income Growth Volatility in the United States: Evidence from Regional Data," Monash Econometrics and Business Statistics Working Papers 21/03, Monash University, Department of Econometrics and Business Statistics.
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  31. 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.
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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 131, Society for Computational Economics.
  2. Steven J. Davis & James A. Kahn, 2007. "Macroeconomic implications of changes in micro volatility," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
  3. 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.
  4. 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 334, Federal Reserve Bank of New York.

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