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

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 by 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 the degree of 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 to our better understanding of the phenomenon of business cycles.

KEYWORDS:

• Synchronization
• regional business cycle
• composite index
• index of industrial production
• Hilbert transform
• Fourier band-pass filter

JEL CLASSIFICATION:

• C65
• E32

Acknowledgments

The authors would like to thank the anonymous referees for helpful comments.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ Another way to identify synchronization in time series is through the wavelet transform. Examples of previous studies using the cross-spectrum of wavelet coefficients to gauge synchronization of BCs include Aguiar-Conraria and Soares (2011) for EU countries and Aguiar-Conraria et al. (2017) for U.S. states.

² Ikeda et al. (2013) also use this filter.

³ The Hilbert transform is discussed in detail in Section III. It has been used occasionally in the economics literature (see Ikeda et al. 2013).

⁴ The CI data for 50 states in the U.S. are from the website of the Federal Reserve Bank of Philadelphia. The IIP data for Japan’s 47 prefectures are from NIKKEI NEEDS.

⁵ To be exact, the phase value is restricted to $[-\pi ,\pi )$ by taking $\mathrm{m}\mathrm{o}\mathrm{d}$ $2\pi$. “Phase” is defined in Section III.

Additional information

Funding

The work was partly supported by the JSPS [KAKENHI 17K05360, 19K01593, 19KK0067, 21K18584]; Tokyo Marine Kagami Memorial Foundation; the JST Precursory Research for Embryonic Science and Technology [JPMJPR16E5].