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States and the business cycle

Author Info

  • Owyang, Michael T.
  • Rapach, David E.
  • Wall, Howard J.

Abstract

We model the US business cycle using a dynamic factor model that identifies common factors underlying fluctuations in state-level income and employment growth. We find three such common factors, each of which is associated with a set of factor loadings that indicate the extent to which each state's economy is related to the national business cycle. According to the factor loadings, there is a great deal of heterogeneity in the nature of the links between state and national economies. In addition to exhibiting geographic patterns, the closeness of state economies to the national business cycle is related not only to differences in industry mix but also to non-industry variables such as agglomeration and neighbor effects. Finally, we find that the common factors tend to explain large proportions of the total variability in state-level business cycles, although, again, there is a great deal of cross-state heterogeneity.

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Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 65 (2009)
Issue (Month): 2 (March)
Pages: 181-194

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Handle: RePEc:eee:juecon:v:65:y:2009:i:2:p:181-194
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622905

Keywords: State business cycles Common factors;

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Cited by:

  1. Michael Owyang & Jeremy Piger & Howard Wall, 2011. "Discordant City Employment Cycles," ERSA conference papers ersa11p1525, European Regional Science Association.
  2. Jonathan N. Millar & Stephen D. Oliner & Daniel E. Sichel, 2012. "Time-to plan lags for commercial construction projects," Finance and Economics Discussion Series 2012-34, Board of Governors of the Federal Reserve System (U.S.).
  3. Casto Montero Kuscevic, 2014. "Okun’s law and urban spillovers in US unemployment," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 53(3), pages 719-730, November.
  4. Bryan Perry & Kerk L Phillips & David E. Spencer, 2015. "State-Level Variation in the Real Wage Response to Monetary Policy," Annals of Economics and Finance, Society for AEF, vol. 16(1), pages 1-17, May.
  5. Arias, Maria A. & Gascon, Charles S. & Rapach, David E., 2014. "Metro Business Cycles," Working Papers 2014-46, Federal Reserve Bank of St. Louis, revised 09 May 2016.
  6. Wall, Howard J., 2011. "The Employment Cycles of Neighboring Cities," MPRA Paper 29410, University Library of Munich, Germany.
  7. Guisinger, Amy Y. & Hernandez-Murillo, Ruben & Owyang, Michael T. & Sinclair, Tara M., 2015. "A State-Level Analysis of Okun's Law," Working Papers 2015-29, Federal Reserve Bank of St. Louis.
  8. Rapach, David E. & Strauss, Jack K., 2012. "Forecasting US state-level employment growth: An amalgamation approach," International Journal of Forecasting, Elsevier, vol. 28(2), pages 315-327.
  9. David Shepherd & Robert Dixon, 2010. "The not-so-great moderation? Evidence on changing volatility from Australian regions," Department of Economics - Working Papers Series 1090, The University of Melbourne.
  10. Scott W Hegerty, 2015. "Employment Cycle Co-Movements and Economic Integration Between Milwaukee and Chicago," Economics Bulletin, AccessEcon, vol. 35(4), pages 2776-2785.
  11. Chad R. Wilkerson, 2009. "Recession and recovery across the nation: lessons from history," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 5-24.
  12. Florian Neumeier, 2015. "Do Businessmen Make Good Governors?," MAGKS Papers on Economics 201519, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  13. Magnusson, Kristin, 2009. "The Impact of U.S. Regional Business Cycles on Remittances to Latin America," SSE/EFI Working Paper Series in Economics and Finance 710, Stockholm School of Economics.
  14. Di Caro, Paolo, 2014. "Regional recessions and recoveries in theory and practice: a resilience-based overview," MPRA Paper 60300, University Library of Munich, Germany.
  15. Michael Artis & Marianne Sensier, 2010. "Tracking Unemployment in the North West Through Recession and Forecasting Recovery," Centre for Growth and Business Cycle Research Discussion Paper Series 136, Economics, The Univeristy of Manchester.
  16. Strauss, Jack, 2013. "Does housing drive state-level job growth? Building permits and consumer expectations forecast a state’s economic activity," Journal of Urban Economics, Elsevier, vol. 73(1), pages 77-93.

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