States and the business cycle

We model the US business cycle using a dynamic factor model that identifies common factors underlying fluctuations in state-level income and employment growth. We find three such common factors, each of which is associated with a set of factor loadings that indicate the extent to which each state�...

Full description

Saved in:
Bibliographic Details
Published in:Journal of urban economics 2009-03, Vol.65 (2), p.181-194
Main Authors: Owyang, Michael T., Rapach, David E., Wall, Howard J.
Format: Article
Language:English
Subjects:
Business cycles
Common factors
Dynamic models
Economic theory
Employment
National economy
National income
Regional economics
State business cycles
State business cycles Common factors
States
Studies
U.S.A
Variance
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:We model the US business cycle using a dynamic factor model that identifies common factors underlying fluctuations in state-level income and employment growth. We find three such common factors, each of which is associated with a set of factor loadings that indicate the extent to which each state's economy is related to the national business cycle. According to the factor loadings, there is a great deal of heterogeneity in the nature of the links between state and national economies. In addition to exhibiting geographic patterns, the closeness of state economies to the national business cycle is related not only to differences in industry mix but also to non-industry variables such as agglomeration and neighbor effects. Finally, we find that the common factors tend to explain large proportions of the total variability in state-level business cycles, although, again, there is a great deal of cross-state heterogeneity.
ISSN:0094-1190
1095-9068
DOI:10.1016/j.jue.2008.11.001