Testing for regional cycles: a Markov-switching approach

Article type: Research Article

Authors: Guha, Debashis^{a; *} | Banerji, Anirvan^a

Affiliations: [a] Economic Cycle Research Institute, New York, NY, USA

Correspondence: [*] Economic Cycle Research Institute, 420 Lexington Ave, Suite 1645, New York, NY 10170, USA. Tel.: + 1 212 557 7788; Fax: + 1 212 557 9874; E-mail: [email protected]

Abstract: This paper presents a method for testing whether business cycle expansions and contractions at different levels of aggregation, such as regional and national cycles, occur at the same time. The procedure is to fit markov-switching models to the time-series and then apply a bootstrap test of equality to the residuals. Applied to US employment data, the test shows significant differences between fluctuations in US national employment and those in some US states. Application to European data reveals significant differences between employment fluctuations at the aggregate EMU level and those in Germany and France.

DOI: 10.3233/JEM-1999-0168

Journal: Journal of Economic and Social Measurement, vol. 25, no. 3-4, pp. 163-182, 1999