Business cycle synchronization among the US states: Spatial effects and regional determinants

This paper investigates the extent and determinants of business cycle synchronization among the US states during the period 2002–2011. Phase synchronization is not measured based on one national reference series, but rather is assessed using pair-wise synchronization indicators computed over the business cycles of all US state pairs. The analysis is based on a natural and intuitive measure of synchronization: the fraction of observations when the cyclical phase is the same for both states in each state pair. Synchronization indicators have a spatially correlated structure. The economic determinants of synchronization are studied using spatial econometric models. Business cycles are more synchronized between those states characterized by strong commercial links and a similar structure in terms of industrialization, labour market characteristics, and openness.