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One business cycle and one trend from (many,) many disaggregates

  • Quah, Danny

Typical analyses of trends and cycles take as given some (one) observable economic variable in whose time path a researcher wishes to find trend and cycle movements. But individual sectors and regions in aggregate economies move neither perfectly with nor independently of each other -- why is it useful to study their aggregate? Using a model for non-stationary, dynamically evolving distributions, this paper provides evidence that in the United States, regional movements that preserve their aggregate time path nevertheless have important, predictive comovements with aggregate GNP. Such predictive content cannot be understood in traditional macro models that seek the source for business cycles in aggregate productivity or monetary shocks.

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File URL: http://www.sciencedirect.com/science/article/B6V64-45R2GBB-H/2/f0be27cd231f98aaea53f89ceb2b960a
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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 38 (1994)
Issue (Month): 3-4 (April)
Pages: 605-614

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Handle: RePEc:eee:eecrev:v:38:y:1994:i:3-4:p:605-614
Contact details of provider: Web page: http://www.elsevier.com/locate/eer

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  1. Eichengreen, Barry, 1990. "One Money for Europe? Lessons from the US Currency Union," Department of Economics, Working Paper Series qt6ks1k831, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  2. Lars Peter Hansen & Thomas J. Sargent, 1979. "Formulating and estimating dynamic linear rational expectations models," Working Papers 127, Federal Reserve Bank of Minneapolis.
  3. Alan P. Kirman, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-136, Spring.
  4. Galor, Oded & Zeira, Joseph, 1988. "Income Distribution and Macroeconomics," MPRA Paper 51644, University Library of Munich, Germany, revised 01 Sep 1989.
  5. 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.
  6. Barro, R.J. & Sala-I-Martin, X., 1991. "Convergence Across States and Regions," Papers 629, Yale - Economic Growth Center.
  7. Danny Quah & Thomas J. Sargent, 1993. "A Dynamic Index Model for Large Cross Sections," NBER Chapters, in: Business Cycles, Indicators and Forecasting, pages 285-310 National Bureau of Economic Research, Inc.
  8. Abraham, Katharine G & Katz, Lawrence F, 1986. "Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances?," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 507-22, June.
  9. Lawrence J. Christiano & Martin Eichenbaum, 1992. "Liquidity Effects and the Monetary Transmission Mechanism," NBER Working Papers 3974, National Bureau of Economic Research, Inc.
  10. Geweke, John & Marshall, Robert C & Zarkin, Gary A, 1986. "Mobility Indices in Continuous Time Markov Chains," Econometrica, Econometric Society, vol. 54(6), pages 1407-23, November.
  11. Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
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