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

David Parsley and Helen Popper

MPRA Paper from University Library of Munich, Germany

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.

Keywords: monetary Union; consumption risk-sharing; economic and political divergence; optimal currency area (search for similar items in EconPapers)
JEL-codes: F20 F33 F4 F42 F45 (search for similar items in EconPapers)
Date: 2019-11-30
New Economics Papers: this item is included in nep-mon and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:98981

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