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Measuring Business Cycles Intra‐Synchronization in US: A Regime‐switching Interdependence Framework
Author(s) -
LeivaLeon Danilo
Publication year - 2017
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/obes.12157
Subject(s) - business cycle , synchronization (alternating current) , reliability (semiconductor) , aggregate (composite) , econometrics , economics , consistency (knowledge bases) , monte carlo method , markov chain , computer science , macroeconomics , statistics , mathematics , physics , telecommunications , channel (broadcasting) , power (physics) , materials science , quantum mechanics , artificial intelligence , machine learning , composite material
This paper proposes a Markov‐switching framework to endogenously identify periods where economies are more likely to (i) synchronously enter recessionary and expansionary phases, and (ii) follow independent business cycles. The reliability of the framework is validated with simulated data in Monte Carlo experiments. The framework is applied to assess the time‐varying intra‐country synchronization in the US. The main results report substantial changes over time in the cyclical affiliation patterns of US states, and show that the more similar the economic structures of states, the higher the correlation between their business cycles. A synchronization‐based network analysis discloses a change in the propagation pattern of aggregate contractionary shocks across states, suggesting that the US has become more internally synchronized since the early 1990s.