The Propagation of Regional Recessions
This paper develops a framework for inferring common Markov-switching components in panel data sets with large cross-section and time series dimensions. We study similarities and differences across U.S. states in the timing of business cycles. We hypothesize that there exists a small number of cluster designations, with individual states in a given cluster sharing certain business cycle characteristics. We find that although oil-producing and agricultural states can sometimes experience a separate recession from the rest of the United States, for the most part, differences across states appear to be a matter of timing, with some states entering recession or recovering before others. © 2012 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.
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Volume (Year): 94 (2012)
Issue (Month): 4 (November)
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