Abstract

http://ssrn.com/abstract=960818
 
 

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A State-Level Analysis of the Great Moderation


Michael Owyang


Federal Reserve Bank of St. Louis - Research Division

Jeremy Piger


University of Oregon - Department of Economics

Howard J. Wall


Lindenwood University - Institute for Study of Economics and the Environment

May 1, 2008

Federal Reserve Bank of St. Louis Working Paper No. 2007-003D

Abstract:     
A number of studies have documented a reduction in aggregate macroeconomic volatility beginning in the early 1980s, i.e., the "Great Moderation." This paper documents the Great Moderation at the state level, finding significant heterogeneity in the timing and magnitude of states' structural breaks. For example, we find that 14 states had breaks that occurred at least three years before or after the aggregate break, while another 11 states did not experience any statistically important break during the period. Volatility reductions were positively related to the initial level of volatility, durable-goods share, and per capita energy consumption; and negatively related to average firm size, bank-branch deregulation, and increases in the share with a high school diploma. The probability of a state experiencing a break was associated with nondurable-goods share, energy consumption, and demographics. We use these results to examine the plausibility of several explanations of the Great Moderation.

Number of Pages in PDF File: 32

Keywords: volatility reduction, state business cycles

JEL Classification: R11, E32

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Date posted: February 6, 2007  

Suggested Citation

Owyang, Michael and Piger, Jeremy and Wall, Howard J., A State-Level Analysis of the Great Moderation (May 1, 2008). Available at SSRN: http://ssrn.com/abstract=960818 or http://dx.doi.org/10.2139/ssrn.960818

Contact Information

Michael Owyang (Contact Author)
Federal Reserve Bank of St. Louis - Research Division ( email )
411 Locust St
Saint Louis, MO 63011
United States
Jeremy M. Piger
University of Oregon - Department of Economics ( email )
Eugene, OR 97403
United States
Howard J. Wall
Lindenwood University - Institute for Study of Economics and the Environment ( email )
209 S. Kingshighway
St. Charles, MO 63301
United States
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References:  28
Citations:  9

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