Abstract

Several studies have been made on regional business cycles from the viewpoint of temporal dynamics. Hayashida and Hewings (2009) studied in the case of Japanese power supply areas. They have shown the possibility that the structural breaks in the dynamics of regional business cycles exist in some areas. However, it remains unanswered that: (1) Do structural breaks really exist in all regions? and (2) When did these changes occur? In this paper, we apply a Bayesian approach to identify a structural change at an unknown change point in a Markov-switching model of the regional business cycles in Japan. Empirical results suggest that the structural change in the regional business cycles is detected like the nation-wide business cycles. However, the phenomenon did not occur in all regions. It is identified only in Tohoku, Kanto and Chugoku regions.