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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.
For a published version of this report, see Marcelle Chauvet and Simon Potter, "Recent Changes in the U.S. Business Cycle," Manchester School of Economic and Social Studies69, no. 5 (special issue 2001): 481-508.