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The U.S. Business Cycle, 1867-1995: A Dynamic Factor Approach

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Author Info
Ritschl, Albrecht
Sarferaz, Samad
Uebele, Martin

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Abstract

This paper reexamines U.S. business cycle volatility since 1867. We employ dynamic factor analysis as an alternative to reconstructed national accounts. We find a remarkable volatility increase across World War I, which is reversed after World War II. While we can generate evidence of postwar moderation relative to pre-1914, this evidence is not robust to structural change, implemented by time-varying factor loadings. However, we find moderation in the nominal series. Moreover, we reproduce the standard moderation since the 1980s. Our estimates confirm the NIPA data also for the 1930s but support alternative estimates of Kuznets (1952) for World War II.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7069.

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Date of creation: Dec 2008
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Handle: RePEc:cpr:ceprdp:7069

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Related research
Keywords: dynamic factor analysis; U.S. business cycle; volatility;

Find related papers by JEL classification:
C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
N11 - Economic History - - Macroeconomics and Monetary Economics; Growth and Fluctuations - - - U.S.; Canada: Pre-1913
N12 - Economic History - - Macroeconomics and Monetary Economics; Growth and Fluctuations - - - U.S.; Canada: 1913-

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  3. Balke, Nathan S & Gordon, Robert J, 1989. "The Estimation of Prewar Gross National Product: Methodology and New Evidence," Journal of Political Economy, University of Chicago Press, vol. 97(1), pages 38-92, February. [Downloadable!] (restricted)
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  5. Higgs, Robert, 1992. "Wartime Prosperity? A Reassessment of the U.S. Economy in the 1940s," The Journal of Economic History, Cambridge University Press, vol. 52(01), pages 41-60, March. [Downloadable!]
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  7. Romer, Christina D, 1989. "The Prewar Business Cycle Reconsidered: New Estimates of Gross National Product, 1869-1908," Journal of Political Economy, University of Chicago Press, vol. 97(1), pages 1-37, February. [Downloadable!] (restricted)
    Other versions:
  8. Lawrence J. Christiano & Terry J. Fitzgerald, 2003. "The Band Pass Filter," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 435-465, 05. [Downloadable!] (restricted)
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  9. Stock, J.H. & Watson, M.W., 1989. "New Indexes Of Coincident And Leading Economic Indicators," Papers 178d, Harvard - J.F. Kennedy School of Government.
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  10. Ravn, Morten O. & Uhlig, Harald, 2001. "On Adjusting the HP-Filter for the Frequency of Observations," CEPR Discussion Papers 2858, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  11. Romer, Christina D, 1991. "The Cyclical Behavior of Individual Production Series, 1889-1984," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 1-31, February. [Downloadable!] (restricted)
  12. Otrok, Christopher & Whiteman, Charles H, 1998. "Bayesian Leading Indicators: Measuring and Predicting Economic Conditions in Iowa," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 997-1014, November.
    Other versions:
  13. Thomas J. Sargent & Christopher A. Sims, 1977. "Business cycle modeling without pretending to have too much a priori economic theory," Working Papers 55, Federal Reserve Bank of Minneapolis. [Downloadable!]
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