NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Changes in Business Cycles: Evidence and Explanations

Christina D. Romer

NBER Working Paper No. 6948
Issued in February 1999
NBER Program(s):   DAE   EFG   ME

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.

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Document Object Identifier (DOI): 10.3386/w6948

Published: Journal of Economic Perspectives, Vol. 13, no. 2 (Spring 1999): 23-44.

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