Regional Synchronization during Economic Contraction: The Case of the U.S. and Japan

TL;DR

This study investigates how regional business cycle synchronization varies during economic contractions and expansions in the U.S. and Japan, revealing increased synchronization during contractions and decreased during expansions, enhancing understanding of business cycle dynamics.

Contribution

It applies a novel, nonlinear method to analyze time-varying regional synchronization in business cycles, which has been rarely used in this context.

Findings

Synchronization increases during contractions.

Synchronization decreases during expansions.

Asymmetry in synchronization phases improves understanding of business cycles.

Abstract

Two decades of studies have found significant regional differences in the timing of transitions in national business cycles and their durations. Earlier studies partly detect regional synchronization during business cycle expansions and contractions in Europe, the United States, and Japan. We examine this possibility applying a sophisticated method for identifying the time-varying degree of synchronization to regional business cycle data in the U.S. and Japan. The method is prominent in nonlinear sciences but has been infrequently applied in business cycle studies.We find that synchronization in regional business cycles increased during contractions and decreased during expansions throughout the period under study.Such asymmetry between the contraction and expansion phases of a business cycle will contribute our better understanding of the phenomenon of business cycles.