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Recent Changes in the US Business Cycle
Author(s) -
Chauvet Marcelle,
Potter Simon
Publication year - 2001
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/1467-9957.00266
Subject(s) - business cycle , volatility (finance) , economics , econometrics , bayesian probability , dynamic factor , macroeconomics , statistics , mathematics
The US business cycle expansion that started in March 1991 is the longest on record. In this paper we use statistical techniques to examine whether this expansion is a one‐time unique event or whether its length is a result of a change in the stability of the US 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 record.