What Drives Regional Business Cycles? The Role of Common and Spatial Components

10 Pages Posted: 27 Aug 2011

See all articles by Michael J. Artis

Michael J. Artis

University of Manchester - Institute for Political & Economic Governance (IPEG)

Christian Dreger

European University Viadrina Frankfurt (Oder); IZA Institute of Labor Economics; Chinese Academy of Social Sciences (CASS)

Konstantin A. Kholodilin

German Institute for Economic Research (DIW Berlin)

Date Written: September 2011

Abstract

We examine real business cycle convergence for 41 euro area regions and 48 US states. The results obtained by a panel model with spatial effects indicate that the impact of national business cycles has been rather stable over the past two decades. A tendency for convergence in business cycles often detected in country data is not confirmed at the regional level. The pattern of synchronization across the euro area is similar to that across US states. Although cyclical heterogeneity is detected, it does not indicate a serious impediment to a common monetary policy of the European Central Bank.

Suggested Citation

Artis, Michael J. and Dreger, Christian and Kholodilin, Konstantin A., What Drives Regional Business Cycles? The Role of Common and Spatial Components (September 2011). The Manchester School, Vol. 79, Issue 5, pp. 1035-1044, 2011, Available at SSRN: https://ssrn.com/abstract=1917186 or http://dx.doi.org/10.1111/j.1467-9957.2010.02214.x

Michael J. Artis

University of Manchester - Institute for Political & Economic Governance (IPEG) ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom

Christian Dreger

European University Viadrina Frankfurt (Oder) ( email )

Frankfurt (Oder)
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Chinese Academy of Social Sciences (CASS) ( email )

Beijing, 100732
China

Konstantin A. Kholodilin

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

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