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Business cycle synchronization across U.S. states

Luís Aguiar-Conraria (), Pedro Brinca (), Guðjónsson Haukur Viðar and Soares Maria Joana
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Guðjónsson Haukur Viðar: Stockholm University, Department of Economics, Stockholm, Sweden
Soares Maria Joana: Universidade do Minho, NIPE and Departmento de Matemática e Aplicações, Largo do Paço, 4704-553 Braga, Portugal

The B.E. Journal of Macroeconomics, 2017, vol. 17, issue 1, 15

Abstract: We use wavelet analysis to conclude that individual U.S. states’ business cycles are very well synchronized. We also find evidence of a strong and significant correlation between business cycle dissimilitudes and the distance between each pair of states, consistent to gravity type mechanisms where distance affects trade. Trade, in turn, increases business cycle synchronization, while a higher degree of industry specialization is associated with a higher dissimilitude of the state cycle with the aggregate economy. Finally, there is evidence that business cycle dissimilitudes have been decreasing with time, consistent with the previous findings coupled with the idea that information and communications technology make distances smaller.

Keywords: business cycle synchronization; continuous wavelet transform; trade (search for similar items in EconPapers)
JEL-codes: E37 E52 R11 (search for similar items in EconPapers)
Date: 2017
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