Stock, JamesWatson, Mark2016-09-132008Stock 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.http://nrs.harvard.edu/urn-3:HUL.InstRepos:28468706This 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.en-USdynamic factor modelstochastic volatilityMonograph or Book2016-09-1310.1093/acprof:oso/9780199549498.003.0003