Co-Movement of Australian State Business Cycles

15 Pages Posted: 23 Dec 2007

See all articles by David Norman

David Norman

affiliation not provided to SSRN

Thomas F. Walker

World Bank; Cornell University


We use a variety of techniques to examine the nature and degree of co-movement among Australian state business cycles. Consistent with the results of Dixon and Shepherd (2001), we find that these cycles move quite closely together, with particularly strong links between the cycles of the larger states. We then seek to understand the causes of this co-movement by using an unobserved components model to distinguish between various shocks and their transmission. Our model implies that the major source of this co-movement in state activity is the commonality of shocks affecting state cycles. In contrast, spillovers of region-specific shocks appear to play only a minor role in creating co-movement, though region-specific shocks themselves have a moderate influence on cyclical fluctuations. These findings are consistent with the results of recent studies for the United States, Canada and Europe, where common shocks have also been found to dominate regional cyclical activity.

Suggested Citation

Norman, David and Walker, Thomas F. and Walker, Thomas F., Co-Movement of Australian State Business Cycles. Australian Economic Papers, Vol. 46, Issue 4, pp. 360-374, December 2007, Available at SSRN: or

David Norman (Contact Author)

affiliation not provided to SSRN

Thomas F. Walker

Cornell University ( email )

Department of Economics
414 Uris Hall
Ithaca, NY 14853-7601
United States


World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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