Cycles Inside Cycles: Spanish Regional Aggregation
This paper sets out a comprehensive framework to identify regional business cycles within Spain and analyses their stylised features and the degree of synchronisation among them and the Spanish economy. The authors show that the regional cycles are quite heterogeneous although they display some degree of synchronisation that can be partially explained using macroeconomic variables. They also propose a dynamic factor model to cluster the regional co-movements and test if the country cycle is simply the aggregation of the regional ones. They find that the Spanish business cycle is not shared by the 17 regions, but is the sum of the different regional behaviours. The implications derived from their results are useful both for policy makers and analysts.