The Evolution of National and Regional Factors in U.S. Housing Construction
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CitationStock J, Watson M. 2008. "The Evolution of National and Regional Factors in U.S. Housing Construction." Volatility and Time Series Econometrics: Essays in Honor of Robert F. Engle, eds. Bollerslev T, Russell J, Watson M. Oxford: Oxford University Press.
AbstractThis paper presents and describes a newly available data set on monthly building permits for U.S. states from 1969-2007. These data are used to estimate regions of common housing construction activity. Building permits exhibit substantial comovement across states, and these comovements are modeled as being associated with a national factor, a regional factor, and a state-specific disturbance. When stochastic volatility is added to this state building permit dynamic factor model, the decline in the volatility in state permits is found to be associated with a sharp decline in the mid-1980s in the volatility of the national factor and with a slow, steady decline in the volatility of the state-specific component, with these two sources contributing approximately equally for a typical state. The timing of the sharp reduction in volatility of the national component coincides with break dates previously identified for the Great Moderation in U.S. economic activity.
Citable link to this pagehttp://nrs.harvard.edu/urn-3:HUL.InstRepos:28468706
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