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A redefinition of economic regions in the U.S

  • Theodore M. Crone
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    Since the 1950s the Bureau of Economic Analysis (BEA) has grouped the states into eight regions based primarily on cross-sectional similarities in their socioeconomic characteristics. This is the most frequently used grouping of states in the U.S. for economic analysis. Since several recent studies concentrate on similarities and differences in regional business cycles, this paper groups states into regions based not on a broad set of socioeconomic characteristics but on the similarities in their business cycles. The analysis makes use of a consistent set of coincident indexes estimated from a Stock and Watson-type model. We applied k-means cluster analysis to the cyclical components of these indexes to group the 48 contiguous states into eight regions with similar cycles. Having grouped the states into regions, we determine the relative strength of cohesion among the states in the various regions. Finally, we compare the regions defined in this paper with the BEA regions.

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    Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 04-12.

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    Date of creation: 2004
    Date of revision:
    Handle: RePEc:fip:fedpwp:04-12
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    1. Christophe Croux & Mario Forni & Lucrezia Reichlin, 2001. "A measure of co-movement for economic variables: theory and empirics," ULB Institutional Repository 2013/10139, ULB -- Universite Libre de Bruxelles.
    2. Carlino Gerald & Defina Robert, 1995. "Regional Income Dynamics," Journal of Urban Economics, Elsevier, vol. 37(1), pages 88-106, January.
    3. Gerald Carlino & Robert Defina, 1998. "The Differential Regional Effects Of Monetary Policy," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 572-587, November.
    4. Francis X. Diebold & Glenn D. Rudebusch, 1994. "Measuring Business Cycles: A Modern Perspective," NBER Working Papers 4643, National Bureau of Economic Research, Inc.
    5. 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.
    6. Gerald Carlino & Keith Sill, 2001. "Regional Income Fluctuations: Common Trends And Common Cycles," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 446-456, August.
    7. William N. Goetzmann & Susan M. Wachter, 1998. "Clustering Methods for Real Estate Portfolios," Yale School of Management Working Papers ysm59, Yale School of Management.
    8. Theodore M. Crone, 1994. "New indexes track the state of the states," Business Review, Federal Reserve Bank of Philadelphia, issue Jan, pages 19-31.
    9. Charles B. Garrison & Hui S. Chang, 1979. "The Effect of Monetary and Fiscal Policies on Regional Business Cycles," International Regional Science Review, , vol. 4(2), pages 167-180, December.
    10. Clark, Todd E, 1998. "Employment Fluctuations in U.S. Regions and Industries: The Roles of National, Region-Specific, and Industry-Specific Shocks," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 202-29, January.
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