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Geographical and Sectoral Shocks in the U.S. Business Cycle

  • Atish R. Ghosh
  • Holger C. Wolf

We examine whether the aggregate U.S. business cycle is driven mainly by geographical" shocks (affecting all sectors within a state), or by sectoral shocks (affecting the same sector in all" states). We find that, at the level of an individual sector in an individual state growth are driven by the sector, not by the state: textiles in Texas moves more with textiles" elsewhere in the U.S. than with other sectors in Texas. But shocks to sector growth rates exhibit" a lower correlation across sectors compared to the correlation of shocks to state growth rates" across states. As a result, geographical shocks gain greater importance at higher levels of" aggregation. Finally, we find that changes in the volatility of the aggregate U.S. business cycle" reflect, to a roughly comparable degree, both changes in the volatility of state and sector business" cycles, and changes in their correlation across sectors and states.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6180.

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Date of creation: Sep 1997
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Handle: RePEc:nbr:nberwo:6180
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  1. Krol, Robert, 1992. "Trends, Random Walks and Persistence: An Empirical Study of Disaggregated U.S. Industrial Production," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 154-59, February.
  2. Lilien, David M, 1982. "Sectoral Shifts and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 777-93, August.
  3. Norrbin, Stefan C & Schlagenhauf, Don E, 1991. "The Importance of Sectoral and Aggregate Shocks in Business Cycles," Economic Inquiry, Western Economic Association International, vol. 29(2), pages 317-35, April.
  4. Lebow, David E., 1993. "The covariability of productivity shocks across industries," Journal of Macroeconomics, Elsevier, vol. 15(3), pages 483-510.
  5. Alan C. Stockman, 1987. "Sectoral and National Aggregate Disturbances to Industrial Output in Seven European Countries," NBER Working Papers 2313, National Bureau of Economic Research, Inc.
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  7. Barro, R.J. & Sala-I-Martin, X., 1991. "Convergence Across States and Regions," Papers 629, Yale - Economic Growth Center.
  8. Norrbin, Stefan C. & Schlagenhauf, Don E., 1988. "An inquiry into the sources of macroeconomic fluctuations," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 43-70, July.
  9. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
  10. Costello, Donna M, 1993. "A Cross-Country, Cross-Industry Comparison of Productivity Growth," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 207-22, April.
  11. Long, John B, Jr & Plosser, Charles I, 1987. "Sectoral vs. Aggregate Shocks in the Business Cycle," American Economic Review, American Economic Association, vol. 77(2), pages 333-36, May.
  12. Todd Clark, 1992. "Business cycle fluctuations in U.S. regions and industries: the roles of national, region-specific, and industry-specific shocks," Research Working Paper 92-05, Federal Reserve Bank of Kansas City.
  13. Stockman, Alan C, 1990. "International Transmission and Real Business Cycle Models," American Economic Review, American Economic Association, vol. 80(2), pages 134-38, May.
  14. Altonji, Joseph G & Ham, John C, 1990. "Variation in Employment Growth in Canada: The Role of External, National, Regional, and Industrial Factors," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages S198-236, January.
  15. Russell Cooper & John C. Haltiwanger, 1987. "Inventories and the Propagation of Sectoral Shocks," NBER Working Papers 2425, National Bureau of Economic Research, Inc.
  16. Samolyk, Katherine A., 1994. "Banking conditions and regional economic performance evidence of a regional credit channel," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 259-278, October.
  17. Kandil, Magda, 1995. "Cyclical fluctuations across industries of the United States: Evidence and implications," Journal of Economics and Business, Elsevier, vol. 47(1), pages 17-37, February.
  18. Kollmann, Robert, 1995. "The correlation of productivity growth across regions and industries in the United States," Economics Letters, Elsevier, vol. 47(3-4), pages 437-443, March.
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