This paper investigates trend and cycle dynamics in per capita income for the major U.S. regions during the 1956–1995 period. Cointegration and serial correlation common features information are used in jointly decomposing the series into trend and cycle components. We find considerable differences in the volatility of regional cycles. Controlling for differences in volatility, we find a great deal of comovement in the cyclical response for all regions but the Far West. Possible sources underlying differences in regional cycles are explored, such as the share of a region's income accounted for by manufacturing, defense spending as a proportion of a region's income, oil price shocks, and the stance of monetary policy. Somewhat surprisingly, we find that the share of manufacturing in a region seems to account for little of the variation in regional cycles relative to national cycles, but manufacturing share differentially affects trend growth for four of the seven regions studied.

This paper examines whether monetary policy has similar effects across regions in the United States. Impulse response functions from an estimated structural vector autoregression reveal a core of regions—New England, Mideast, Plains, Southeast, and the Far West— that respond to monetary policy changes in ways that closely approximate the U.S. average response. Of the three noncore regions, one (Great Lakes) is noticeably more sensitive to monetary policy changes, and two (Southwest and Rocky Mountains) are found to be much less sensitive. A state-level version of the model is estimated and used to provide evidence on the channels for monetary policy.

This study investigates the structure/conduct/performance relationship in retail deposit markets. The study explicitly incorporates conduct as the link between structure and performance in local deposit markets. It attempts to determine whether banks typically behave competitively or strategically, and whether their conduct is influenced by market concentration. The empirical investigation is guided by an equilibrium model of a retail deposit market. The model is applied to regression equations for local (MSA) MMDA and three- and six-month CD rates. The empirical results indicate that strategic conduct is the norm in MMDA and in three- and six-month CD markets. Copyright 1991 by MIT Press.

Partisanship of state governors affects the efficacy of US federal fiscal policy. Using close election data, we find partisan differences in the marginal propensity to spend federal intergovernmental transfers: Republican governors spend less than Democratic governors. Correspondingly, Republican-led states have lower debt, (delayed) lower taxes, and initially lower economic activity. A New Keynesian model of partisan states in a monetary union implies sizable aggregate effects: The intergovernmental transfer impact multiplier rises by 0.58 if Republican governors spend like Democratic governors, but due to delayed tax cuts, the long-run multiplier is higher with more Republican governors, generating an intertemporal policy trade-off. (JEL D72, E12, E62, H71, H72, H74, H77)