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America's First Great Moderation

  • Joseph Davis (a1) and Marc D. Weidenmier (a2)


We identify the longest expansion in U.S. history, a recession-free 16-year period from 1841 to 1856 that we call America's First Great Moderation. Using newer data on industrial production, we show that the record-long expansion was primarily driven by a boom in transportation-goods investment following the discovery of gold in California. Furthermore, the low volatility of industrial production and stock returns during the First Great Moderation, which occurred during a period without a U.S. central bank, is similar to that observed for the Second Great Moderation (1984–2007).

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We thank Barry Eichengreen, Christina Romer, David Romer, Christopher Hanes, Joseph Ferrie, Lou Cain, and Marcelle Chauvet as well as seminar participants at UC-Berkeley, UC-Riverside, Northwestern University, and the NBER Summer Institute for helpful comments and suggestions. We thank Ryan Shaffer for superb research assistance.



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