DP1236 Aggregate and Regional Disaggregate Fluctuations

Author(s): Danny Quah
Publication Date: September 1995
Keyword(s): Aggregate Disturbance, Business Cycle, Distribution Dynamics, Regional Fluctuation, Stochastic Kernel
JEL(s): C32, C33, E32
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1236

This paper models fluctuations in regional disaggregates as a non-stationary, dynamically evolving distribution. Doing so enables the study of the dynamics of aggregate fluctuations jointly with those of the rich cross-section of regional disaggregates. For the United States, the leading state (regardless of which it happens to be) contains strong predictive power for aggregate fluctuations. This effect is difficult to understand if only aggregate disturbances affect aggregate business cycles through aggregate propagation mechanisms. Instead, a better picture might be one of a `wave' of regional dynamics, rippling across the national economy.