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Common trends and common cycles in regional per capita incomes

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  • Gerald Carlino
  • Keith Sill

Abstract

Cyclical dynamics at the regional level are investigated using newly developed times-series techniques that allow a decomposition of aggregate data into common trends and common cycles. The authors apply the common-trend/common-cycle representation to per capita personal income for the eight BEA regions using quarterly data for the period 1948:1-93:4. Their analysis reveals considerable differences in the volatility of regional cycles. Controlling for differences in volatility, the authors find a great deal of comovement in the cyclical response of four regions (New England, Mideast, Great Lakes, and Southeast), which they call the core region, and the nation. The authors find some evidence of comovement of the Plains, Rocky Mountain, and Far West regions and the nation, but to a much lesser extent than the comovement among the core regions and the nation. Finally, the cyclical response of the Southwest region is strongly negatively correlated with that of all the other regions and the nation.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 96-13.

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Date of creation: 1996
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Handle: RePEc:fip:fedpwp:96-13

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Keywords: Business cycles ; Income ; Regional economics;

References

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  1. Engle, Robert F & Kozicki, Sharon, 1993. "Testing for Common Features: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(4), pages 393-95, October.
  2. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  3. Carolyn Sherwood-Call, 1988. "Exploring the relationships between national and regional economic fluctuations," Economic Review, Federal Reserve Bank of San Francisco, issue Sum, pages 15-25.
  4. Carlino Gerald & Defina Robert, 1995. "Regional Income Dynamics," Journal of Urban Economics, Elsevier, vol. 37(1), pages 88-106, January.
  5. Brian A. Cromwell, 1992. "Does California drive the West? an econometric investigation of regional spillovers," Economic Review, Federal Reserve Bank of San Francisco, pages 13-23.
  6. Gerald Carlino & Robert DeFina, 1994. "Does monetary policy have differential regional effects?," Working Papers 94-23, Federal Reserve Bank of Philadelphia.
  7. Decressin, Jörg & Fatás, Antonio, 1994. "Regional Labour Market Dynamics in Europe," CEPR Discussion Papers 1085, C.E.P.R. Discussion Papers.
  8. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  9. Petersen, Bruce & Strongin, Steven, 1996. "Why Are Some Industries More Cyclical Than Others?," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(2), pages 189-98, April.
  10. Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-48, April.
  11. W. Lee Hoskins, 1991. "Price stability and regional diversity," Economic Commentary, Federal Reserve Bank of Cleveland, issue May.
  12. Engle, Robert F. & Issler, Joao Victor, 1995. "Estimating common sectoral cycles," Journal of Monetary Economics, Elsevier, vol. 35(1), pages 83-113, February.
  13. Engle, Robert F & Kozicki, Sharon, 1993. "Testing for Common Features," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(4), pages 369-80, October.
  14. Loungani, Prakash & Rogerson, Richard, 1989. "Cyclical fluctuations and sectoral reallocation : Evidence from the PSID," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 259-273, March.
  15. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
  16. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
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Cited by:
  1. Vahid, F. & Issler, J.V., 2001. "The Importance Of Common Cyclical Features in VAR Analysis: A Monte-Carlo Study," Monash Econometrics and Business Statistics Working Papers 2/01, Monash University, Department of Econometrics and Business Statistics.
  2. Gerald Carlino & Keith Sill, 1997. "Regional economies: separating trends from cycles," Business Review, Federal Reserve Bank of Philadelphia, issue May, pages 19-31.
  3. Osmani Teixeira de Carvalho Guillén & João Victor Issler & George Athanasopoulos, 2006. "Forecasting Accuracy and Estimation Uncertainty using VAR Models with Short- and Long-Term Economic Restrictions: A Monte-Carlo Study," IBMEC RJ Economics Discussion Papers 2006-01, Economics Research Group, IBMEC Business School - Rio de Janeiro.

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