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This paper deals with the identification of, and explanations for, co-movement in regional business cycles using data for Australian states and territories (regions). The authors show that both raw growth rates and the deviations from a Hodrick-Prescott trend reflect noise in the series as well as any cycle but that it is possible to manipulate the deviations from a Hodrick-Prescott trend in a simple way so as to reveal its cyclical component. They measure the extent of co-movements in employment fluctuations amongst the regions. They find that cross-region correlations in employment cycles can be explained by regional industry structure and size while the noise component of regional fluctuations appears instead to be related to physical geography.
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