Optimum Currency Area and Business Cycle Synchronization Across U.S. States

Luís Aguiar-Conraria (), Pedro Brinca, Haukur Gudjonsson () and Maria Joana Soares ()
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Maria Joana Soares: Universidade do Minho, NIPE and Departmento de Matemática e Aplicações

No 1/2015, NIPE Working Papers from NIPE - Universidade do Minho

Abstract: We use wavelet analysis to investigate to what extent individual U.S. states' business cycles are synchronized. The results show that the U.S. states are remarkably well synchronized compared to the previous findings w.r.t. the Euro Area. There is also a strong and significant correlation between business cycle dissimilitudes and the distance between each pair of states, consistent to gravity type mechanisms where distance affects trade. Trade, in turn, increases business cycle synchronization. Finally we show that a higher degree of industry specialization is associated with a higher dissimilitude of the state cycle with the aggregate economy.

Keywords: Optimum currency areas; business cycle synchronization; continuous wavelet transform; trade (search for similar items in EconPapers)
JEL-codes: E37 E52 R11 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-mac, nep-mon and nep-opm
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Working Paper: Optimal currency area and business cycle synchronization across U.S. states (2015)
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