TY - JOUR AU - Watson,Mark W. TI - Business Cycle Durations and Postwar Stabilization of the U.S. Economy JF - National Bureau of Economic Research Working Paper Series VL - No. 4005 PY - 1992 Y2 - March 1992 DO - 10.3386/w4005 UR - http://www.nber.org/papers/w4005 L1 - http://www.nber.org/papers/w4005.pdf N1 - Author contact info: Mark W. Watson Department of Economics Princeton University Princeton, NJ 08544-1013 Tel: 609/258-4811 Fax: 609/258-5533 E-Mail: mwatson@princeton.edu AB - The average length of business cycle contractions in the United States fell from 20.5 months in the prewar period to 10.7 months in the postwar period. Similarly, the average length of business cycle expansions rose from 25.3 months in the prewar period to 49.9 months in the postwar period. This paper investigates three explanations for this apparent duration stabilization. The first explanation is that shocks to the economy have been smaller in the postwar period. This implies that duration stabilization should be present in both aggregate and sectoral output data. The second explanation is that the composition of output has shifted from sectors that are very cyclical, like manufacturing, to sectors that are less cyclical, like services. This would lead to increased stability in aggregate output even in the absence of increased stability in the individual sectors. The third explanation is that the apparent stabilization is largely spurious, and is caused by differences in the way that prewar and postwar business cycle reference dates were chosen by the NBER. The evidence presented in this paper favors this third explanation. ER -