Business Cycle Comovements in Industrial Subsectors
Presentation
Overview
Overview
Description
Recessions are characterized by a strong degree of comovement across sectors of the economy. We study this comovement in a multi-state regime switching model where recessions propagate between a national, coordinated cycle and idiosyncratic cycles for groups of industrial subsectors. We find the primary determinant of coincident recessions are if two subsectors are in the same broad industry classification. This result supports the theory of recessions coming from aggregate shocks rather than idiosyncratic shocks transmitting up and down the production stream.
