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Common business cycles and volatilities in US states and MSAs: The role of economic uncertainty
journal contribution
posted on 2018-10-22, 08:11 authored by Rangan Gupta, J. Ma, Marian Risse, Mark WoharThis paper analyses the role of a news-based measure of economic policy uncertainty (EPU) in explaining time-varying co-movements in economic activity and volatility of 48 US states and 51 largest MSAs. In this regard, we, first, estimate a dynamic factor model with time-varying loadings and stochastic volatility (DFM-TV-SV). Then, in the second step, we use a quantile-on-quantile (QQ) predictive regression model to capture the effect of EPU on the common factor and stochastic volatility derived from the DFM-TV-SV for the states and MSAs. Our results show that EPU has a significant negative effect on the common economic activity of both the states and MASs, and it also significantly increases the common volatility. However, the impact of uncertainty varies substantially depending on the initial states (quantiles) of both common output or volatility and EPU. Thus, our results tend to suggest that policy design should be state-dependent.
History
School
- Business and Economics
Department
- Business
Published in
Journal of MacroeconomicsVolume
57Pages
317 - 337Citation
GUPTA, R. ... et al, 2018. Common business cycles and volatilities in US states and MSAs: The role of economic uncertainty. Journal of Macroeconomics, 57, pp.317-337.Publisher
© ElsevierVersion
- AM (Accepted Manuscript)
Publisher statement
This work is made available according to the conditions of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) licence. Full details of this licence are available at: https://creativecommons.org/licenses/by-nc-nd/4.0/Acceptance date
2018-06-21Publication date
2018Notes
This paper was accepted for publication in the journal Journal of Macroeconomics and the definitive published version is available at https://doi.org/10.1016/j.jmacro.2018.06.009.ISSN
0164-0704Publisher version
Language
- en