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The Old and the New in the U.S. Economic Expansion

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  • Victor Zarnowitz

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    (The Conference Board)

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    Abstract

    Some analysts see the expansion of the 1990s as uniquely long and strong. Moreover, according to one popular view, the noninflationary boom can continue indefinitely. To shed some light on this debate, this paper compares the 1990s systematically with two previous long economic expansions, using 31 variables on real activity, inflation, productivity, wages, profits, interest rates, stock prices, foreign trade, and fiscal and monetary policies. Contrary to the popular conception, the cumulative gains in activity were greater in the 1960s and even in the 1980s than in the 1990s. This is because the recovery of 1991-1992 was unusually sluggish, and despite the fact that lately U.S. growth was indeed remarkably high and stable. Inflation was decreasing or stable, a fact which is new for the post-World War II period (but not for the longer historical perspective). Disinflation or deflation abroad contributed much to this outcome, as did the new technologies. The declines of interest rates reflected mostly reductions in inflation and the national debt. Profit margins increased strongly. Still, there are potential imbalances from overborrowing, overspending and undersaving, and rising current account deficits. Overvaluation in some parts of the stock market is probable and worrisome, but hard to evaluate.

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    File URL: http://www.conference-board.org/economics/workingpapers.cfm?pdf=E-0005-01-WP
    File Function: First version, 2000
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    Bibliographic Info

    Paper provided by The Conference Board, Economics Program in its series Economics Program Working Papers with number 01-01.

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    Length: 62 pages
    Date of creation: Jan 2001
    Date of revision:
    Handle: RePEc:cnf:wpaper:0101

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    1. Stephen G. Cecchetti, 1995. "Inflation Indicators and Inflation Policy," NBER Chapters, in: NBER Macroeconomics Annual 1995, Volume 10, pages 189-236 National Bureau of Economic Research, Inc.
    2. Dale W. Jorgenson & Kevin J. Stiroh, 2000. "Raising the Speed Limit: U.S. Economic Growth in the Information Age," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(1), pages 125-236.
    3. Arturo Estrella & Gikas A. Hardouvelis, 1989. "The term structure as a predictor of real economic activity," Research Paper 8907, Federal Reserve Bank of New York.
    4. Arturo Estrella & Frederic S. Mishkin, 1995. "The Term Structure of Interest Rates and Its Role in Monetary Policy for The European Central Bank," NBER Working Papers 5279, National Bureau of Economic Research, Inc.
    5. Christopher A. Sims, 1992. "Interpreting the Macroeconomic Time Series Facts: The Effects of Monetary Policy," Cowles Foundation Discussion Papers 1011, Cowles Foundation for Research in Economics, Yale University.
    6. Victor Zarnowitz & Geoffrey H. Moore, 1986. "Major Changes in Cyclical Behavior," NBER Chapters, in: The American Business Cycle: Continuity and Change, pages 519-582 National Bureau of Economic Research, Inc.
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