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Working Paper
House Price Growth Interdependencies and Comovement
This paper examines house price comovement across U.S. metropolitan areas (MSAs). We develop a Markov-switching framework that includes a spatial similarity element based on distances between MSAs. Our approach allows for house price comovements that occur due to similar timing of downturns across groups or clusters of MSAs. The inclusion of the spatial element improves the model fit compared to a standard endogenous clustering model. We find seven clusters of MSAs, where each cluster experiences idiosyncratic house price downturns, plus one distinct national house price cycle. Notably, only ...
Working Paper
House Price Growth Interdependencies and Comovement
This paper examines house price diffusion across metropolitan areas in the United States. We develop a generalization of the Hamilton and Owyang (2012) Markov-switching model, where we incorporate direct regional spillovers using a spatial weighting matrix. The Markov-switching framework allows consideration for house price movements that occur due to similar timing of downturns across MSAs. The inclusion of the spatial weighting matrix improves fit compared to a standard endogenous clustering model. We find seven clusters of MSAs that experience idiosyncratic recessions plus one distinct ...
Working Paper
Industrial Connectedness and Business Cycle Comovements
The effect of economic shocks on business cycles fluctuations may vary across industries. For example, shocks that originate in a single industry may propagate elsewhere, either up or down stream in the production chain. Thus, industries that are more connected may be more vulnerable to industry-specific economic shocks. However, any model of industrial connectedness must account for the fact that much of the inter-industry correlation will be driven by national shocks. In light of this, we develop a panel Markov-switching model for industry-level data that incorporates a number of features ...
Working Paper
From Organization to Activity in the US Collateralized Interbank Market
This paper studies and connects market organization and activity in the US collateralized interbank market using an assumption-neutral approach. We apply cluster analysis to aggregate activity factors suggested by prior studies to support two market organizations: three-tier and core-periphery. We find that four bank-specific factors and one economic conditions factor explain interbank activity for both alternative organizations. We also find evidence that the interbank market organization affects institutions? borrowing and lending. While both organizations moderate interbank activity, the ...
Working Paper
Industrial Connectedness and Business Cycle Comovements
While aggregate shocks account for most business cycle fluctuations, sectoral shocks have become relatively more important since the 1980s. Previous studies show that sectoral shocks propagate through industry supply chains. Typically, sectors are defined by similarities in function and/or market. While some industries have supply chains within their own sector (vertical), others have supply chains across a number of sectors (horizontal). Similarity in these supply chain characteristics appear to be a determining factor in how industries comove. Using industrial production data of 82 ...
Working Paper
Business Cycles Across Space and Time
We study the comovement of international business cycles in a time series clustering model with regime-switching. We extend the framework of Hamilton and Owyang (2012) to include time-varying transition probabilities to determine what drives similarities in business cycle turning points. We find four groups, or "clusters", of countries which experience idiosyncratic recessions relative to the global cycle. Additionally, we find the primary indicators of international recessions to be fluctuations in equity markets and geopolitical uncertainty. In out-of-sample forecasting exercises, we find ...
Working Paper
House Price Growth Interdependencies and Comovement
This paper examines house price comovement across U.S. metropolitan areas (MSAs). We develop a Markov-switching framework that includes a spatial similarity element based on distances between MSAs. Our approach allows for house price comovements that occur due to similar timing of downturns across groups or clusters of MSAs. The inclusion of the spatial element improves the model fit compared to a standard endogenous clustering model. We find seven clusters of MSAs, where each cluster experiences idiosyncratic house price downturns, plus one distinct national house price cycle. Notably, only ...
Working Paper
Business Cycles Across Space and Time
We study the comovement of international business cycles in a time series clustering model with regime-switching. We extend the framework of Hamilton and Owyang (2012) to include time-varying transition probabilities to determine what drives similarities in business cycle turning points. We find four groups, or "clusters", of countries which experience idiosyncratic recessions relative to the global cycle. Additionally, we find the primary indicators of international recessions to be fluctuations in equity markets and geopolitical uncertainty. In out-of-sample forecasting exercises, we find ...