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The Propagation of Regional Recessions

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  • James D. Hamilton
  • Michael T. Owyang

Abstract

This paper develops a framework for inferring common Markov-switching components in a panel data set with large cross-section and time-series dimensions. We apply the framework to studying 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.

Suggested Citation

  • James D. Hamilton & Michael T. Owyang, 2011. "The Propagation of Regional Recessions," NBER Working Papers 16657, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:16657
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    References listed on IDEAS

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    1. Owyang, Michael T. & Piger, Jeremy M. & Wall, Howard J. & Wheeler, Christopher H., 2008. "The economic performance of cities: A Markov-switching approach," Journal of Urban Economics, Elsevier, vol. 64(3), pages 538-550, November.
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    3. James D. Hamilton, 2005. "What's real about the business cycle?," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 435-452.
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    7. Arthur F. Burns & Wesley C. Mitchell, 1946. "Measuring Business Cycles," NBER Books, National Bureau of Economic Research, Inc, number burn46-1.
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    14. Sylvia Kaufmann, 2010. "Dating and forecasting turning points by Bayesian clustering with dynamic structure: a suggestion with an application to Austrian data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(2), pages 309-344.
    15. Carlino, Gerald A. & DeFina, Robert H., 2004. "How strong is co-movement in employment over the business cycle? Evidence from state/sector data," Journal of Urban Economics, Elsevier, vol. 55(2), pages 298-315, March.
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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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