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Geographical and Sectoral Shocks in the U.S. Business Cycle

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  • Atish R. Ghosh
  • Holger C. Wolf

Abstract

We examine whether the aggregate U.S. business cycle is driven mainly by geographical" shocks (affecting all sectors within a state), or by sectoral shocks (affecting the same sector in all" states). We find that, at the level of an individual sector in an individual state growth are driven by the sector, not by the state: textiles in Texas moves more with textiles" elsewhere in the U.S. than with other sectors in Texas. But shocks to sector growth rates exhibit" a lower correlation across sectors compared to the correlation of shocks to state growth rates" across states. As a result, geographical shocks gain greater importance at higher levels of" aggregation. Finally, we find that changes in the volatility of the aggregate U.S. business cycle" reflect, to a roughly comparable degree, both changes in the volatility of state and sector business" cycles, and changes in their correlation across sectors and states.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6180.

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Date of creation: Sep 1997
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Handle: RePEc:nbr:nberwo:6180

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  1. Krol, Robert, 1992. "Trends, Random Walks and Persistence: An Empirical Study of Disaggregated U.S. Industrial Production," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 154-59, February.
  2. Lilien, David M, 1982. "Sectoral Shifts and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 90(4), pages 777-93, August.
  3. Kandil, Magda, 1995. "Cyclical fluctuations across industries of the United States: Evidence and implications," Journal of Economics and Business, Elsevier, Elsevier, vol. 47(1), pages 17-37, February.
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  5. Stockman, Alan C., 1988. "Sectoral and national aggregate disturbances to industrial output in seven European countries," Journal of Monetary Economics, Elsevier, Elsevier, vol. 21(2-3), pages 387-409.
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  7. Joseph Altonji & John C. Ham, 1985. "Variation in Employment Growth in Canada: The Role of External, National, Regional and Industrial Factors," Working Papers, Princeton University, Department of Economics, Industrial Relations Section. 581, Princeton University, Department of Economics, Industrial Relations Section..
  8. Barro, R.J. & Sala-I-Martin, X., 1991. "Convergence Across States and Regions," Papers, Yale - Economic Growth Center 629, Yale - Economic Growth Center.
  9. Norrbin, Stefan C. & Schlagenhauf, Don E., 1988. "An inquiry into the sources of macroeconomic fluctuations," Journal of Monetary Economics, Elsevier, Elsevier, vol. 22(1), pages 43-70, July.
  10. Todd Clark, 1992. "Business cycle fluctuations in U.S. regions and industries: the roles of national, region-specific, and industry-specific shocks," Research Working Paper, Federal Reserve Bank of Kansas City 92-05, Federal Reserve Bank of Kansas City.
  11. Kollmann, Robert, 1995. "The correlation of productivity growth across regions and industries in the United States," Economics Letters, Elsevier, Elsevier, vol. 47(3-4), pages 437-443, March.
  12. Norrbin, Stefan C & Schlagenhauf, Don E, 1991. "The Importance of Sectoral and Aggregate Shocks in Business Cycles," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 29(2), pages 317-35, April.
  13. 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.
  14. Lebow, David E., 1993. "The covariability of productivity shocks across industries," Journal of Macroeconomics, Elsevier, Elsevier, vol. 15(3), pages 483-510.
  15. Cooper, Russell & Haltiwanger, John, 1990. "Inventories and the Propagation of Sectoral Shocks," American Economic Review, American Economic Association, American Economic Association, vol. 80(1), pages 170-90, March.
  16. Long, John B, Jr & Plosser, Charles I, 1987. "Sectoral vs. Aggregate Shocks in the Business Cycle," American Economic Review, American Economic Association, American Economic Association, vol. 77(2), pages 333-36, May.
  17. Eduardo Borensztein & Jonathan David Ostry, 1994. "Economic Reform and Structural Adjustment in East European Industry," IMF Working Papers, International Monetary Fund 94/80, International Monetary Fund.
  18. Costello, Donna M, 1993. "A Cross-Country, Cross-Industry Comparison of Productivity Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(2), pages 207-22, April.
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Citations

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Cited by:
  1. Gerald Carlino & Robert DeFina & Keith Sill, 2005. "On the stability of employment growth: a postwar view from the U.S. states," Working Papers 04-21, Federal Reserve Bank of Philadelphia.
  2. Del Negro, Marco, 2002. "Asymmetric shocks among U.S. states," Journal of International Economics, Elsevier, Elsevier, vol. 56(2), pages 273-297, March.
  3. Miklos Koren & Silvana Tenreyro, 2005. "Volatility and development," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 3743, London School of Economics and Political Science, LSE Library.
  4. Frank Barry & Colm Kearney, 2003. "A Portfolio Analysis of Industrial Structure," Working Papers, School Of Economics, University College Dublin 200309, School Of Economics, University College Dublin.
  5. Svaleryd, Helena & Vlachos, Jonas, 2000. "Does Financial Development Lead to Trade Liberalization?," Research Papers in Economics, Stockholm University, Department of Economics 2000:11, Stockholm University, Department of Economics.
  6. Gerald Carlino & Robert DeFina & Keith Sill, 2002. "The cyclical behavior of state employment during the postwar period," Working Papers 02-14, Federal Reserve Bank of Philadelphia.
  7. Lahiri, Kajal & Yao, Wenxiong, 2004. "A dynamic factor model of the coincident indicators for the US transportation sector," MPRA Paper 22360, University Library of Munich, Germany.
  8. Kajal Lahiri & Herman O. Stekler & Wenxiong Yao & Peg Young, 2003. "Monthly Output Index for the U.S. Transportation Sector," Discussion Papers, University at Albany, SUNY, Department of Economics 03-12, University at Albany, SUNY, Department of Economics.
  9. Andreas Haufler & Alexander Klemm & Guttorm Schjelderup, 2009. "Economic integration and the relationship between profit and wage taxes," Public Choice, Springer, Springer, vol. 138(3), pages 423-446, March.
  10. Kajal Lahiri & Wenxiong Yao & Peg Young, 2003. "Cycles in the Transportation Sector and the Aggregate Economy," Discussion Papers, University at Albany, SUNY, Department of Economics 03-14, University at Albany, SUNY, Department of Economics.
  11. Haufler, Andreas & Klemm, Alexander & Schjelderup, Guttorm, 2006. "Globalisation and the mix of wage and profit taxes," Discussion Papers in Economics, University of Munich, Department of Economics 885, University of Munich, Department of Economics.
  12. Miklos Koren & Silvana Tenreyro, 2003. "Diversification and development," Working Papers, Federal Reserve Bank of Boston 03-3, Federal Reserve Bank of Boston.

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