The heterogeneous effects of global and national business cycles on employment in US states and metropolitan areas
The growth of globalisation in recent decades has increased the importance of external factors as drivers of the business cycle in many countries. Globalisation affects countries not just at the macro level but at the level of states and metro areas as well. The paper presented in this seminar isolates the relative importance of global, national and region-specific shocks as drivers of the business cycle in individual US states and metro areas.
The paper presented in this seminar provides a framework to endogenise rates of return for risk-free bonds and risky capital in an overlapping generation model, where the return on capital is endogenized by introducing idiosyncratic production shocks to avoid computation challenges associated with aggregate production shocks in the literature. The framework enables the interaction between financial markets and macroeconomic conditions in a production economy.