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Money And Interest Rates As Predictors Of Regional Economic Activity

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  • Paul J. Kozlowski

    (University of Toledo)

Abstract

This paper revisits the issue of monetary influences on regional economies. It explores linkages between national financial variables and economic activity in the Detroit MSA and the state of South Carolina, regions with very different industrial structures. Tests on the information-content of money and interest rates and evaluation of contributions to forecasting regional employment reveal that interest rates outperform monetary aggregates over several business cycles. Detroit is more sensitive to interest rates than South Carolina, but the latter is far from immune to changing national monetary conditions. The spread between rates on commercial paper and treasury bills outperforms monetary aggregates as a predictor of short-run changes in the regional economies. This result is in line with findings for the nation.

Suggested Citation

  • Paul J. Kozlowski, 1995. "Money And Interest Rates As Predictors Of Regional Economic Activity," The Review of Regional Studies, Southern Regional Science Association, vol. 25(2), pages 143-157, Fall.
    • Handle: RePEc:rre:publsh:v:25:y:1995:i:2:p:143-157
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    References listed on IDEAS

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    4. Donald P. Morgan, 1993. "Asymmetric effects of monetary policy," Economic Review, Federal Reserve Bank of Kansas City, vol. 78(Q II), pages 21-33.
    5. James H. Stock & Mark W. Watson, 1989. "New Indexes of Coincident and Leading Economic Indicators," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 351-409, National Bureau of Economic Research, Inc.
    6. Friedman, Benjamin M & Kuttner, Kenneth N, 1992. "Money, Income, Prices, and Interest Rates," American Economic Review, American Economic Association, vol. 82(3), pages 472-492, June.
    7. Bryon Higgins, 1992. "Policy implications of recent M2 behavior," Economic Review, Federal Reserve Bank of Kansas City, vol. 77(Q III), pages 21-36.
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    Cited by:

    1. Tamotsu Onozaki, 2018. "Nonlinearity, Bounded Rationality, and Heterogeneity," Springer Books, Springer, number 978-4-431-54971-0, December.
    2. Maria Gadea & Ana Gómez-Loscos & Antonio Montañés, 2012. "Cycles inside cycles: Spanish regional aggregation," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 3(4), pages 423-456, December.
    3. Esashi, Kunihiko & Onozaki, Tamotsu & Saiki, Yoshitaka & Sato, Yuzuru, 2018. "Intermittent transition between synchronization and desynchronization in multi-regional business cycles," Structural Change and Economic Dynamics, Elsevier, vol. 44(C), pages 68-76.
    4. Hammond, George W., 1998. "Monetary Policy and Regional Price and Wage Dispersion in the U.S," The Review of Regional Studies, Southern Regional Science Association, vol. 28(3), pages 65-84, Winter.

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