Cycles inside cycles: Spanish regional aggregation

Abstract

This paper sets out a comprehensive framework to identify regional business cycles within Spain and analyses their stylised features and the degree of synchronisation both within them and between them and the Spanish economy. We show that the regional cycles are quite heterogeneous although they display some degree of synchronisation. We also propose a dynamic factor model to cluster the regional comovements. We find that the Spanish business cycle is not the same as those of the 17 regions, but is the sum of the different regional behaviours. Clusters with a high industrial weight, per capita income and human capital and a low unemployment rate are also more synchronized. The implications derived from our results are useful both for policy makers and analysts.

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Correspondence to Maria Dolores Gadea.

Additional information

The authors are grateful to two anonymous referees for their useful suggestions and the editor for his encouragement. We would also like to thank M. Camacho, J.R. Cancelo, B. Candelon, J.M. Casado, E.M. Quilis and G. Pérez-Quirós for their helpful comments on previous versions of this paper. We acknowledge financial support from the Ministerio de Ciencia y Tecnología through grants ECO2008/03040 and ECO2009/13085. The usual disclaimer applies.

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Gadea, M.D., Gómez-Loscos, A. & Montañés, A. Cycles inside cycles: Spanish regional aggregation. SERIEs 3, 423–456 (2012). https://doi.org/10.1007/s13209-011-0068-1

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Keywords

  • Business cycle
  • Synchronisation measures
  • Dynamic factor models
  • Regional policy

JEL Classification

  • C22
  • C32
  • E32
  • R11