Global, Regional, and Idiosyncratic Drivers of U.S. 20 States’ Business Cycles
Abstract
This study examines the global, regional, and idiosyncratic drivers of business cycle fluctuations in the 20 largest U.S. states by Gross State Product (GSP) over 1992–2020, situating them within a broader international context of 21 countries. A Bayesian dynamic multi-factor model extracts latent factors that capture these distinct sources of variation and decomposes the variance of state-level macroeconomic indicators. To explain cross-state heterogeneity in factor exposure, Bayesian Model Averaging (BMA) highlights the role of industrial structure, trade openness, and demographic composition. The latent factors are further incorporated into a Factor-Augmented VAR (FAVAR) to forecast state-level employment dynamics. By distinguishing global, regional, and idiosyncratic influences, the framework improves predictive accuracy and reveals how international and regional shocks propagate unevenly across U.S. labor markets.
Working Paper 2:
Heterogeneous Asymmetric Regional Effects of Monetary Policy over the Business Cycle
Abstract
The study investigates the asymmetric effects of U.S. monetary policy on state-level economic activity across different phases of the business cycle. Drawing on monthly state coincident indexes from 1979 to 2019 and state-specific recession probabilities estimated via Markov-switching models, the analysis reveals that in more than half of the U.S. states, the impact of monetary policy shocks varies significantly depending on whether the economy is in expansion or recession. The most prevalent asymmetry observed is that monetary tightening during expansions produces stronger contractionary effects than equivalent shocks during recessions. These results underscore the importance of incorporating both regional heterogeneity and business cycle phase when assessing the transmission of national monetary policy.
Work in Progress 1:
U.S. Monetary Policy Spillovers to Global Economic Hubs: A Panel VAR Analysis