Template-Type: ReDIF-Paper 1.0 
Title: How regional business cycles diffuse across space and time: evidence from a Bayesian Markov switching panel of GDP and unemployment in Poland
Author-Name: Agnieszka Rabiej 
Author-Name: Dominika Sikora 
Author-Name: Andrzej Torój 
Abstract: We investigate the regional business cycles at NUTS-3 granularity in Poland (N=73) using two variables in parallel: GDP dynamics and unemployment. The model allows for bothidiosyncratic business cycle fluctuations in a region in the form of 2-state Markov chain, as well as spatial interactions with other regions. The posterior distribution of the parameters issimulated with a Metropolis-within-Gibbs procedure. We find that the regions can be classified into business cycle setters and takers, and this classification exhibits a high degree of overlapwith the line of division between metropolitan versus peripheral regions. We also find that, under large N, the fixed-effects methods, as proposed in the previous literature, are vulnerable to bothidentification issues and (MCMC) convergence problems, especially with short T, which is of critical importance in GDP on the considered spatial granularity level.
Number: 2023-082
Length: 25 pages 
Creation-Date: 2023-01
Keywords: business cycle, spatial autoregression, NUTS-3, Markov switching, Bayesian analysis
Classification-JEL: C11, C23, C24, R12
File-URL: https://hdl.handle.net/20.500.12182/1171
File-Format: Application/pdf
DOI: 10.33119/kaewps2023082
Handle: RePEc:sgh:kaewps:2023082