Working Paper: NBER ID: w6180
Authors: Atish R. Ghosh; Holger C. Wolf
Abstract: We examine whether the aggregate U.S. business cycle is driven mainly by geographical" shocks (affecting all sectors within a state), or by sectoral shocks (affecting the same sector in all" states). We find that, at the level of an individual sector in an individual state growth are driven by the sector, not by the state: textiles in Texas moves more with textiles" elsewhere in the U.S. than with other sectors in Texas. But shocks to sector growth rates exhibit" a lower correlation across sectors compared to the correlation of shocks to state growth rates" across states. As a result, geographical shocks gain greater importance at higher levels of" aggregation. Finally, we find that changes in the volatility of the aggregate U.S. business cycle" reflect, to a roughly comparable degree, both changes in the volatility of state and sector business" cycles, and changes in their correlation across sectors and states.
Keywords: No keywords provided
JEL Codes: E30; E32; E37
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| sectoral shocks (F41) | output growth (O40) |
| geographical shocks (F69) | output growth (O40) |
| sector shocks (E32) | state shocks (H79) |
| correlation of sector shocks across sectors (C10) | correlation of state shocks across states (C10) |
| volatility of aggregate US business cycle (E32) | changes in volatility of state and sector business cycles (E32) |