Recent changes in the U.S. business cycle

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Recent changes in the U.S. business cycle

Author Info

Marcelle Chauvet
Simon Potter

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Abstract

The U.S. business cycle expansion that started in March 1991 is the longest on record. This paper uses statistical techniques to examine whether this expansion is a onetime unique event or whether its length is a result of a change in the stability of the U.S. economy. Bayesian methods are used to estimate a common factor model that allows for structural breaks in the dynamics of a wide range of macroeconomic variables. We find strong evidence that a reduction in volatility is common to the series examined. Further, the reduction in volatility implies that future expansions will be considerably longer than the historical average.

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Paper provided by Federal Reserve Bank of New York in its series Staff Reports with number 126.

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Date of creation: 2001
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Handle: RePEc:fip:fednsr:126

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Article
- Chauvet, Marcelle & Potter, Simon, 2001. "Recent Changes in the US Business Cycle," Manchester School, University of Manchester, vol. 69(5), pages 481-508, Special I. [Downloadable!] (restricted)

This paper has been announced in the following NEP Reports:

NEP-ALL-2001-06-08 (All new papers)
NEP-TID-2001-06-08 (Technology & Industrial Dynamics)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

M. Sensier & D. Van Dijk, 2001. "Short-term volatility versus long-term growth," Econometric Institute Report 219, Erasmus University Rotterdam, Econometric Institute. [Downloadable!]
Francis X. Diebold & Glenn D. Rudebusch, 1990. "Have postwar economic fluctuations been stabilized?," Discussion Paper / Institute for Empirical Macroeconomics 33, Federal Reserve Bank of Minneapolis. [Downloadable!]
Other versions:
- Francis X. Diebold & Glenn D. Rudebusch, 1991. "Have postwar economic fluctuations been stabilized?," Working Paper Series / Economic Activity Section 116, Board of Governors of the Federal Reserve System (U.S.).
- Diebold, Francis X & Rudebusch, Glenn D, 1992. "Have Postwar Economic Fluctuations Been Stabilized?," American Economic Review, American Economic Association, vol. 82(4), pages 993-1005, September. [Downloadable!] (restricted)
Chauvet, Marcelle, 1998. "An Econometric Characterization of Business Cycle Dynamics with Factor Structure and Regime Switching," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 969-96, November.
Koop, Gary & Potter, Simon M., 1998. "Bayes factors and nonlinearity: Evidence from economic time series1," Journal of Econometrics, Elsevier, vol. 88(2), pages 251-281, November. [Downloadable!] (restricted)

Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

M Sensier & D van Dijk, 2003. "Testing for Volatility Changes in US Macroeconomic Time Series," Centre for Growth and Business Cycle Research Discussion Paper Series 36, Economics, The Univeristy of Manchester. [Downloadable!]
Other versions:
- Marianne Sensier & Dick van Dijk, 2004. "Testing for Volatility Changes in U.S. Macroeconomic Time Series," The Review of Economics and Statistics, MIT Press, vol. 86(3), pages 833-839, 08. [Downloadable!] (restricted)
Marco Gallegati & Mauro Gallegati, 2007. "Wavelet Variance Analysis of Output in G-7 Countries," Studies in Nonlinear Dynamics & Econometrics, Berkeley Electronic Press, vol. 11(3), pages 1435-1435. [Downloadable!] (restricted)
Michael T. Owyang & Jeremy Piger & Howard J. Wall & Federal Reserve Bank of St. Louis, 2006. "A State-Level Analysis of the Great Moderation," Computing in Economics and Finance 2006 131, Society for Computational Economics. [Downloadable!]
Other versions:
- Michael T. Owyang & Jeremy M. Piger & Howard J. Wall, 2007. "A state-level analysis of the Great Moderation," Working Papers 2007-003, Federal Reserve Bank of St. Louis. [Downloadable!]
Andrew Hughes Hallett & Christian Richter, 2006. "Is the convergence of business cycles a global or regional issue? The UK, US and Euroland," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 11(3), pages 177-194. [Downloadable!]
N.R. Swanson & D.J.C. van Dijk, 2001. "Are statistical reporting agencies getting it right? Data rationality and business cycle asymmetry," Econometric Institute Report 230, Erasmus University Rotterdam, Econometric Institute. [Downloadable!]
Other versions:
- Swanson, Norman R. & van Dijk, Dick, 2006. "Are Statistical Reporting Agencies Getting It Right? Data Rationality and Business Cycle Asymmetry," Journal of Business & Economic Statistics, American Statistical Association, vol. 24, pages 24-42, January. [Downloadable!] (restricted)
Guglielmo Maria Caporale & Luis A. Gil-Alana, 2007. "A Multivariate Long-Memory Model with Structural Breaks," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
Konstantin A. Kholodilin, 2002. "Some Evidence of Decreasing Volatility of the US Coincident Economic Indicator," Economics Bulletin, Economics Bulletin, vol. 3(20), pages 1-20. [Downloadable!]
Marcelle Chauvet, 2001. "The Brazilian Economic Fluctuations," Anais do XXIX Encontro Nacional de Economia [Proceedings of the 29th Brazilian Economics Meeting] 033, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics]. [Downloadable!]
Aßmann, Christian & Hogrefe, Jens & Liesenfeld, Roman, 2005. "The Decline in German Output Volatility: A Bayesian Analysis," Economics working papers 2006,02, Christian-Albrechts-University of Kiel, Department of Economics. [Downloadable!]
M. Sensier & D. Van Dijk, 2001. "Short-term volatility versus long-term growth," Econometric Institute Report 219, Erasmus University Rotterdam, Econometric Institute. [Downloadable!]
Ana Maria Herrero & Elena Pesavento, 2003. "The Decline In US Output Volatility: Structural Changes in Inventories or Sales?," Emory Economics 0301, Department of Economics, Emory University (Atlanta). [Downloadable!]
Alejandro Justiniano & Northwestern University, 2006. "The Time Varying Volatility of Macroeconomic Fluctuations," Computing in Economics and Finance 2006 219, Society for Computational Economics. [Downloadable!]
Marcelle Chauvet & James D. Hamilton, 2005. "Dating Business Cycle Turning Points," NBER Working Papers 11422, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Alejandro Justiniano & Giorgio E. Primiceri, 2006. "The Time Varying Volatility of Macroeconomic Fluctuations," NBER Working Papers 12022, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Giorgio Primiceri & Alejandro Justiniano, 2006. "The Time Varying Volatility of Macroeconomic Fluctuations," 2006 Meeting Papers 353, Society for Economic Dynamics. [Downloadable!]
Marcelle Chauvet & Simon Potter, 2001. "Forecasting recessions using the yield curve," Staff Reports 134, Federal Reserve Bank of New York. [Downloadable!]
Other versions:
- Marcelle Chauvet & Simon Potter, 2005. "Forecasting recessions using the yield curve," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 24(2), pages 77-103. [Downloadable!]
D.J. van Dijk & D.R. Osborn & M. Sensier, 2002. "Changes in variability of the business cycle in the G7 countries," Econometric Institute Report 282, Erasmus University Rotterdam, Econometric Institute. [Downloadable!]
Other versions:
- D van Dijk & D R Osborn & M Sensier, 2002. "Changes in Variability of the Business Cycle in the G7 Countries," Centre for Growth and Business Cycle Research Discussion Paper Series 16, Economics, The Univeristy of Manchester. [Downloadable!]
- D van Dijk & D R Osborn & M Sensier, 2002. "Changes in variability of the business cycle in the G7 countries," The School of Economics Discussion Paper Series 0204, Economics, The University of Manchester. [Downloadable!]
Oleg Korenok & Stanislav Radchenko, 2006. "The role of permanent and transitory components in business cycle volatility moderation," Empirical Economics, Springer, vol. 31(1), pages 217-241, March. [Downloadable!] (restricted)
Other versions:
- Oleg Korenok & Stanislav Radchenko, 2004. "The Role of Permanent and Transitory Components in Business Cycle Volatility Moderation," Departmental Working Papers 200413, Rutgers University, Department of Economics. [Downloadable!]
- Stan Radchenko & Oleg Korenok, 2004. "The role of permanent and transitory components in business cycle volatility moderation," Econometric Society 2004 North American Summer Meetings 149, Econometric Society. [Downloadable!]
James H. Stock & Mark W. Watson, 2002. "Has the Business Cycle Changed and Why?," NBER Working Papers 9127, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Luca Benati, . "Evolving post-World War II UK economic performance," Bank of England working papers 232, Bank of England. [Downloadable!]
Other versions:
- Luca Benati, 2003. "Evolving Post-World War II U.K. Economic Performance," Computing in Economics and Finance 2003 171, Society for Computational Economics.
Chang-Jin Kim & Charles Nelson & Jeremy M. Piger, 2003. "The less volatile U.S. economy: a Bayesian investigation of timing, breadth, and potential explanations," Working Papers 2001-016, Federal Reserve Bank of St. Louis. [Downloadable!]
Other versions:
- Chang-Jin Kim & Charles Nelson & Jeremy Piger, 2001. "The less volatile U.S. economy: a Bayesian investigation of timing, breadth, and potential explanations," International Finance Discussion Papers 707, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
- Kim, Chang-Jin & Nelson, Charles R & Piger, Jeremy, 2004. "The Less-Volatile U.S. Economy: A Bayesian Investigation of Timing, Breadth, and Potential Explanations," Journal of Business & Economic Statistics, American Statistical Association, vol. 22(1), pages 80-93, January.
Marco Gallegati & Mauro Gallegati, 2005. "Wavelet variance and correlation analyses of output in G7 countries," Macroeconomics 0512017, EconWPA. [Downloadable!]
Christian Richter & Andrew Hughes Hallett, 2005. "A Time-Frequency Analysis of the Coherences of the US Business," Computing in Economics and Finance 2005 45, Society for Computational Economics. [Downloadable!]

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