Abstract
This article investigates conditional growth volatility for industrial production in the U.S. during 1828–1915, taking as a reference sectoral and aggregate indexes constructed in connection to Davis (Quart J Econ 119:1177–1215, 2004). The period includes the major shock represented by the Civil War with the associated resource allocation distortions. The evidence mostly suggests high persistence in conditional volatility as would be found in later studies for the U.S. on GDP growth volatility. However, the evidence of asymmetric volatility appears to be more localized and salient examples of a stronger role of negative shocks on volatility can be identified in the cases of the textile, machinery and metals sectors that might have been more vulnerable to the Civil War. As for interindustry linkages, a complementary factor analysis suggests that the communality changes between the antebellum and postbellum eras. The relative importance of the aggregate shocks increased considerably after the Civil War. This indicates that the Civil War had significant effects in raising the cross-correlation between most sectors, suggesting substantial changes in the basic productive relationships in U.S. 19th century economy.
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05 August 2019
In the original publication of the article, the word “analyzes” should be replaced with “analysis” throughout the article.
Notes
For a comprehensive discussion on this subject, see Davis (2004).
The authors considered disaggregated analysis for anthracite coal, bituminous coal, NY canal traffic, Erie canal traffic, cotton consumption, lead production and pig iron production.
Another prominent work analyzing unconditional volatility for individual production series is the one by Romer (1991), but for a later period that does not include the Civil War.
All intermediate results tests pertaining to unit roots and structural breaks are not reported for conciseness but can be obtained from the authors upon request.
A more complex approach would involve a Markov switching structure in the regime change in GARCH models as exemplified by Bhar and Hamori (2003).
Diagnostic tests pertaining to normality and ARCH structure in residuals of the EGARCH models with dummy variables were employed and do not indicate misspecifications in the models.
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The authors acknowledge comments from two anonymous referees and advices from the coordinating editor, but the usual caveats apply. This study was financed in part by the Coordenação de Aperfeiçoamento de Pessoal de Nível Superior - Brasil (CAPES) - Finance Code 001.
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The original version of this article was revised: The word “analyzes” was replaced with “analysis” throughout the article.
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Freire, G., Resende, M. Conditional growth volatility and sectoral comovement in U.S. industrial production, 1828–1915. Empir Econ 59, 3063–3084 (2020). https://doi.org/10.1007/s00181-019-01740-2
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DOI: https://doi.org/10.1007/s00181-019-01740-2