Mechanisms for Geographical Transmission of Economic Fluctuations

Geographers have made considerable descriptive progress in studies of business cycles, but the ways in which economic impulses are transmitted, known as “the transmission mechanism,'’remain inadequately analyzed. After reviewing several transmission mechanisms proposed in previous studies, the paper suggests that interregional commodity trade, with limited mobility of factors of production such as labor, is an obvious candidate for transmitting economic fluctuations among regions. Three models are constructed to analyze transmission mechanisms involved in interregional commodity trade in a monetary setting. Increases in wages or unemployment in one region could induce increases or decreases in wages or unemployment in another region. The directions of transmitted changes depend crucially on the cause of the change and the economic structures of the regions involved.