Why do regional economies behave differently? A modelling approach to analyse region-specific dynamics along the business cycle

Even though the evolution of regional economic activity is substantially explained by national/common economic shocks, regional economies can still engage in significant differential or divergent behaviours with regard to the national average across business cycles. In this article, we describe a mo...

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Bibliographic Details
Published in:Applied economics letters 2021-09, Vol.28 (16), p.1391-1399
Main Authors: Lasarte-López, Jesús Miguel, Carbonero-Ruz, Mariano, Nekhay, Olexandr, Rodero-Cosano, María Luisa
Format: Article
Language:English
Subjects:
Business cycles
difference indicators
dynamic factor model
Economic activity
Economic analysis
Economic shock
Economic theory
Economics
GDP differential
real-time dataset
Regional economic activity
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Summary:Even though the evolution of regional economic activity is substantially explained by national/common economic shocks, regional economies can still engage in significant differential or divergent behaviours with regard to the national average across business cycles. In this article, we describe a modelling approach based on factor models that estimates differences in quarterly regional GDP levels and allows for the evaluation of the variables that best explain these differentials. To provide an example of the application of this approach, two Spanish regions are used: Andalusia and Catalonia.
ISSN:1350-4851
1466-4291
DOI:10.1080/13504851.2020.1820436