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Business cycle phases in U.S. states

  • Michael T. Owyang
  • Jeremy M. Piger
  • Howard J. Wall

The U.S. aggregate business cycle is often characterized as a series of distinct recession and expansion phases. We apply a regime-switching model to state-level coincident indexes to characterize state business cycles in this way. We find that states differ a great deal in the levels of growth that they experience in the two phases: Recession growth rates are related to industry mix, whereas expansion growth rates are related to education and age composition. Further, states differ significantly in the timing of switches between regimes, indicating large differences in the extent to which state business cycle phases are in concord with those of the aggregate economy.

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Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2003-011.

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Date of creation: 2004
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Publication status: Published in Review of Economics and Statistics, November 2005, 87(4), pp. 604-16
Handle: RePEc:fip:fedlwp:2003-011
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  2. Michael A. Kouparitsas, 2001. "Is the United States an optimum currency area? an empirical analysis of regional business cycles," Working Paper Series WP-01-22, Federal Reserve Bank of Chicago.
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  11. Chauvet, Marcelle, 1998. "An Econometric Characterization of Business Cycle Dynamics with Factor Structure and Regime Switching," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 969-96, November.
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  14. Boldin Michael D., 1996. "A Check on the Robustness of Hamilton's Markov Switching Model Approach to the Economic Analysis of the Business Cycle," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 1(1), pages 1-14, April.
  15. Michael T. Owyang & Howard J. Wall, 2004. "Structural breaks and regional disparities in the transmission of monetary policy," Working Papers 2003-008, Federal Reserve Bank of St. Louis.
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  19. John Geweke, 1991. "Evaluating the accuracy of sampling-based approaches to the calculation of posterior moments," Staff Report 148, Federal Reserve Bank of Minneapolis.
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  22. Albert, James H & Chib, Siddhartha, 1993. "Bayes Inference via Gibbs Sampling of Autoregressive Time Series Subject to Markov Mean and Variance Shifts," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(1), pages 1-15, January.
  23. Chang-Jin Kim & Charles R. Nelson, 1999. "State-Space Models with Regime Switching: Classical and Gibbs-Sampling Approaches with Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262112388, June.
  24. Ellen R. Rissman, 1999. "Regional employment growth and the business cycle," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 21-39.
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  27. Fratantoni, Michael & Schuh, Scott, 2003. " Monetary Policy, Housing, and Heterogeneous Regional Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(4), pages 557-89, August.
  28. Don Harding & Adrian Pagan, 1999. "Knowing the Cycle," Melbourne Institute Working Paper Series wp1999n12, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
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