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Co-movement of Australian State Business Cycles

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  • David Norman

    (Reserve Bank of Australia)

  • Thomas Walker

    (Reserve Bank of Australia)

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    Abstract

    We use a variety of techniques to examine the nature and degree of co-movement among Australian state business cycles. Our results indicate that these cycles move quite closely together, with particularly strong links between the cycles of the larger states. This finding is robust to a range of statistical measures. We also use an unobserved components model to attempt to distinguish the sources of this co-movement. An implication of our model is that the major source of cyclical fluctuation in state activity is shocks that are common to all states. Region-specific shocks appear to have a moderate influence on cyclical fluctuations, while spillovers of such shocks from one state to another seem to play only a minor role. These findings are consistent with the results of recent studies for the United States, Canada and Europe, where common shocks have also been found to dominate regional cyclical activity.

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    Bibliographic Info

    Paper provided by Reserve Bank of Australia in its series RBA Research Discussion Papers with number rdp2004-09.

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    Date of creation: Oct 2004
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    Handle: RePEc:rba:rbardp:rdp2004-09

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    Keywords: business cycles; concordance; unobserved components;

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    Cited by:
    1. Nalini Prasad & Anthony Richards, 2006. "Measuring Housing Price Growth – Using Stratification to Improve Median-based Measures," RBA Research Discussion Papers rdp2006-04, Reserve Bank of Australia.
    2. Hall, Viv B & McDermott, C John, 2011. "An unobserved components common cycle for Australasia? Implications for a common currency," Working Paper Series 1548, Victoria University of Wellington, School of Economics and Finance.

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