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Unlike humans, economic expansions "do not become progressively
more fragile with age," San Francisco Fed chief researcher Glenn
Rudebusch wrote in the latest edition of the regional bank's
Economic Letter. "(B)ased only on age, an 80-month-old expansion
has effectively the same chance of ending as a 40-month-old
expansion."
The study, which draws on a branch of statistics known as
survival analysis, provides a glimpse into the reasoning of Fed
Chair Janet Yellen, who in December said at a news conference
that she does not believe the length of the current expansion
means "its days are numbered."
While before World War Two it actually was true that the longer
expansions lasted the more likely they were to end, the same is
not true of postwar expansions, Rudebusch found. One reason, he
said, could be that postwar recoveries are driven less by the
production of goods than by the production of services; in
addition, he wrote, the federal government including the Fed is
now more focused on stabilizing the economy than it had been
before the war.
The current economic expansion is nearly seven years old, making
it one of the more longer lived recoveries in the postwar
period.
(Reporting by Ann Saphir; Editing by Chizu Nomiyama)
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