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GDP Synchronicity and Risk Sharing Channels in a Monetary Union: Blue State and Red States

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  • Parsley, David
  • Popper, Helen

Abstract

We examine state GDP comovement and consumption risk-sharing channels within the United States as a whole, and among states whose populations have voted consistently Democrat (Blue) or Republican (Red) in national elections. We document three facts: (1) state GDP growth is asynchronous, and Blue and Red states are particularly out of sync; (2) at the same time, interstate consumption risk-sharing is very high{it is high even across the political divide, and it is high even where the role of fiscal flows is minimal; and (3) the channels of risk sharing across Blue, Red, and Swing states are quite different.

Suggested Citation

  • Parsley, David & Popper, Helen, 2019. "GDP Synchronicity and Risk Sharing Channels in a Monetary Union: Blue State and Red States," MPRA Paper 98981, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:98981
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    References listed on IDEAS

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    More about this item

    Keywords

    monetary Union; consumption risk-sharing; economic and political divergence; optimal currency area;
    All these keywords.

    JEL classification:

    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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