GDP Synchronicity and Risk Sharing Channels in a Monetary Union: Blue State and Red States

Parsley, David and Popper, Helen (2019): GDP Synchronicity and Risk Sharing Channels in a Monetary Union: Blue State and Red States.

Abstract

We examine state GDP comovement and consumption risk-sharing channels within the United States as a whole, and among states whose populations have voted consistently Democrat (Blue) or Republican (Red) in national elections. We document three facts: (1) state GDP growth is asynchronous, and Blue and Red states are particularly out of sync; (2) at the same time, interstate consumption risk-sharing is very high{it is high even across the political divide, and it is high even where the role of fiscal flows is minimal; and (3) the channels of risk sharing across Blue, Red, and Swing states are quite different.

• Item Type: MPRA Paper
• Language: English
• Keywords: monetary Union, consumption risk-sharing, economic and political divergence, optimal currency area
• Subjects: F - International Economics > F2 - International Factor Movements and International Business > F20 - General; F - International Economics > F3 - International Finance > F33 - International Monetary Arrangements and Institutions; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F42 - International Policy Coordination and Transmission; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F45 - Macroeconomic Issues of Monetary Unions

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