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Changes in Business Cycles: Evidence and Explanations

49 Pages Posted: 4 Mar 1999  

Christina D. Romer

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: February 1999

Abstract

This paper analyzes changes in American business cycles over the twentieth century and suggests a possible explanation for the major changes that have and have not occurred. The empirical analysis shows that the volatility of annual real macroeconomic indicators and the average severity of recessions have declined only slightly between the pre-World War I and post-World War II eras. Recessions have, however, become somewhat less frequent and more uniform. The paper goes on to suggest that the advent of macroeconomic policy after World War II can account for both the continuity and the changes in business cycles. Countercyclical monetary policy and automatic stabilizers have prolonged postwar expansions and prevented severe depressions. At the same time, policy-induced booms and recessions have led to the continued volatility of the postwar economy.

Suggested Citation

Romer, Christina D., Changes in Business Cycles: Evidence and Explanations (February 1999). NBER Working Paper No. w6948. Available at SSRN: https://ssrn.com/abstract=150071

Christina D. Romer (Contact Author)

National Bureau of Economic Research (NBER)

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