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Competitive and Complementary Relationship between Regional Economies: A Study of the Great Lake States

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  • Sungyup Chung
  • Geoffrey J.D. Hewings

Abstract

Since regional economies are exposed to the region common shock, the degree of co-movement of each region's business cycle is strong, possibly exaggerating or biasing the dependency on its neighbor regions. By separating out the common shock and the individual shocks using a multi-level dynamic factor model suggested by Bai and Wang, the possible misunderstanding of regional interdependency can be prevented. An application to the Great Lakes region revealed that much of the region-specific business activities can be explained by the region common shock, and the spillovers from neighbors are small or insignificant.

Suggested Citation

  • Sungyup Chung & Geoffrey J.D. Hewings, 2015. "Competitive and Complementary Relationship between Regional Economies: A Study of the Great Lake States," Spatial Economic Analysis, Taylor & Francis Journals, vol. 10(2), pages 205-229, June.
    • Handle: RePEc:taf:specan:v:10:y:2015:i:2:p:205-229
    DOI: 10.1080/17421772.2015.1027252
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    References listed on IDEAS

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    1. Bai, Jushan & Wang, Peng, 2012. "Identification and estimation of dynamic factor models," MPRA Paper 38434, University Library of Munich, Germany.
    2. Todd E. Clark & Kwanho Shin, 1998. "The sources of fluctuations within and across countries," Research Working Paper 98-04, Federal Reserve Bank of Kansas City.
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