| Abstract: | The purpose of this paper is to examine how regional manufacturing responds to a decline in manufacturing activity nationwide. A trivariate VAR model of the relationships between the Federal Reserve Board's Industrial Production Index for manufacturing, and two regional manufacturing output indexes is estimated. The regions considered correspond to the Fifth and the Seventh Federal Reserve Districts. A negative shock in the national index is imposed on the system to demonstrate the following: durations and general patterns of the impulse responses; severity of the responses in the two patterns; reaction times; and interregional differences in response patterns. The findings indicate that the response patterns generally differ between the regions. |
