Abstract

http://ssrn.com/abstract=277356
 
 

References (10)



 
 

Citations (205)



 


 



The Long and Large Decline in U.S. Output Volatility


Olivier J. Blanchard


International Monetary Fund (IMF); National Bureau of Economic Research (NBER)

John A. Simon


Reserve Bank of Australia - Economic Research

April 2001

MIT Dept. of Economics Working Paper No. 01-29

Abstract:     
The last two U.S. expansions have been unusually long. One view is that this is the result of luck, of an absence of major adverse shocks over the last twenty years. We argue that more is at work, namely a large underlying decline in output volatility. This decline is not a recent development, but rather a steady one, visible already in the 1950s and the 1960s, interrupted in the 1970s and early 1980s, with a return to trend in the late 1980s and the 1990s. The standard deviation of quarterly output growth has declined by a factor of 3 over the period. This is more than enough to account for the increased length of expansions.

We reach two other conclusions. First, the trend decrease can be traced to a number of proximate causes, from a decrease in the volatility in government spending early on, to a decrease in consumption and investment volatility throughout the period, to a change in the sign of the correlation between inventory investment and sales in the last decade. Second, there is a strong relation between movements in output volatility and inflation volatility. This association accounts for the interruption of the trend decline in output volatility in the 1970s and early 1980s.

Number of Pages in PDF File: 41

Keywords: output volatility, recession, expansion, fluctuations, amplitude

JEL Classification: E30, E32

working papers series


Download This Paper

Date posted: July 25, 2001  

Suggested Citation

Blanchard, Olivier J. and Simon, John A., The Long and Large Decline in U.S. Output Volatility (April 2001). MIT Dept. of Economics Working Paper No. 01-29. Available at SSRN: http://ssrn.com/abstract=277356 or http://dx.doi.org/10.2139/ssrn.277356

Contact Information

Olivier J. Blanchard (Contact Author)
International Monetary Fund (IMF) ( email )
700 19th Street, N.W.
Washington, DC 20431
United States
202 623 7825 (Phone)
202 623 7271 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
John A. Simon
Reserve Bank of Australia - Economic Research ( email )
GPO Box 3947
Sydney, NSW 2001
Australia
Feedback to SSRN


Paper statistics
Abstract Views: 6,574
Downloads: 1,091
Download Rank: 9,846
References:  10
Citations:  205

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo6 in 0.688 seconds