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Using state indexes to define economic regions in the U.S

  • Theodore M. Crone
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    When regional economists study the interaction of multi-state regions in the U.S., they typically use the regional divisions developed by the U.S. Bureau of the Census or the Bureau of Economic Analysis (BEA). The current census divisions were adopted in 1910 and divide the states into nine regional groups for the presentation of data. Since the 1950s, the BEA has grouped the states into eight regions based primarily on cross-sectional similarities in their socioeconomic characteristics. The BEA definition of regions is perhaps the most frequently used grouping of states for economic analysis. ; Since many economic studies of regions concentrate on similarities and differences in regional business cycles, it seems appropriate to group states into regions based on some common cyclical behavior. This paper explores the possibility of grouping states into regions based on common movements in state indexes of economic activity. These state indexes are variants of the coincident index developed by James Stock and Mark Watson for the U.S. economy. ; The author has applied cluster analysis to the monthly changes in these economic activity indexes to group the states into regions with similar business cycles. He has identified six distinct regions consisting of contiguous states with similar monthly changes in their economic activity indexes.

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    File URL: http://www.philadelphiafed.org/research-and-data/publications/working-papers/1999/wp99-19.pdf
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    Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 99-19.

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    Date of creation: 1999
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    Handle: RePEc:fip:fedpwp:99-19
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    1. Gerald A. Carlino & Robert H. DeFina, 1996. "Does monetary policy have differential regional effects?," Business Review, Federal Reserve Bank of Philadelphia, issue Mar, pages 17-27.
    2. Carlino, Gerald & Lang, Richard, 1989. "Interregional flows of funds as a measure of economic integration in the United States," Journal of Urban Economics, Elsevier, vol. 26(1), pages 20-29, July.
    3. Carlino, Gerald A. & Mills, Leonard, 1996. "Testing neoclassical convergence in regional incomes and earnings," Regional Science and Urban Economics, Elsevier, vol. 26(6), pages 565-590, December.
    4. William N. Goetzmann & Susan M. Wachter, 1998. "Clustering Methods for Real Estate Portfolios," Yale School of Management Working Papers ysm59, Yale School of Management.
    5. Gerald Carlino & Keith Sill, 1997. "Regional economies: separating trends from cycles," Business Review, Federal Reserve Bank of Philadelphia, issue May, pages 19-31.
    6. Leonard Mills, 1991. "Understanding national and regional housing trends," Business Review, Federal Reserve Bank of Philadelphia, issue Sep, pages 15-23.
    7. Theodore M. Crone, 1994. "New indexes track the state of the states," Business Review, Federal Reserve Bank of Philadelphia, issue Jan, pages 19-31.
    8. James H. Stock & Mark W. Watson, 1989. "New Indexes of Coincident and Leading Economic Indicators," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 351-409 National Bureau of Economic Research, Inc.
    9. Carlino Gerald & Defina Robert, 1995. "Regional Income Dynamics," Journal of Urban Economics, Elsevier, vol. 37(1), pages 88-106, January.
    10. Carlino, Gerald A. & Mills, Leonard O., 1993. "Are U.S. regional incomes converging? : A time series analysis," Journal of Monetary Economics, Elsevier, vol. 32(2), pages 335-346, November.
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