Money And Interest Rates As Predictors Of Regional Economic Activity

Paul J. Kozlowski
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Paul J. Kozlowski: University of Toledo

The Review of Regional Studies, 1995, vol. 25, issue 2, 143-157

Abstract: This paper revisits the issue of monetary influences on regional economies. It explores linkages between national financial variables and economic activity in the Detroit MSA and the state of South Carolina, regions with very different industrial structures. Tests on the information-content of money and interest rates and evaluation of contributions to forecasting regional employment reveal that interest rates outperform monetary aggregates over several business cycles. Detroit is more sensitive to interest rates than South Carolina, but the latter is far from immune to changing national monetary conditions. The spread between rates on commercial paper and treasury bills outperforms monetary aggregates as a predictor of short-run changes in the regional economies. This result is in line with findings for the nation.

Date: 1995
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