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Macroeconomic Shocks and Regional Employment: The Case of Southern California

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  • Yamashiro, Guy
  • Grobar, Lisa

Abstract

In this study, we specify a disaggregated vector autoregression model (VAR) to analyze the behavior of employment in three Southern California counties during two different types of aggregate economic downturns. Using this model, we estimate the impact of hypothetical, one-time shocks to macroeconomic variables, on employment levels by county. The two adverse shocks that we examine are a monetary (demand) shock, and an oil price (supply) shock. Our empirical framework allows us to examine, within a single model, the dynamic behavior of employment during these downturns. We provide evidence that even within regional economies in the United States, employment levels respond differentially to macroeconomic shocks. Our model also allows us to examine how the impact of these shocks on total county employment has changed over time. In particular, we find that, over the sample period, total employment across Southern California has become less sensitive to oil price shocks.

Suggested Citation

  • Yamashiro, Guy & Grobar, Lisa, 2005. "Macroeconomic Shocks and Regional Employment: The Case of Southern California," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 35(2).
  • Handle: RePEc:ags:jrapmc:132307
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    References listed on IDEAS

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    1. Marvin J. Barth III & Valerie A. Ramey, 2002. "The Cost Channel of Monetary Transmission," NBER Chapters,in: NBER Macroeconomics Annual 2001, Volume 16, pages 199-256 National Bureau of Economic Research, Inc.
    2. Ivo J.M. Arnold, 2013. "The industry effects of monetary policy and their welfare implications," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 53(214), pages 287-315.
    3. 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.
    4. Morten O. Ravn & Harald Uhlig, 2002. "On adjusting the Hodrick-Prescott filter for the frequency of observations," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 371-375.
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