Will Stability Last?

38 Pages Posted: 19 Nov 2004

See all articles by William E. Martin

William E. Martin

University of Cambridge - Faculty of Economics and Politics; London Metropolitan University - Finance Department

Bob Rowthorn

University of Cambridge - Department of Applied Economics

Date Written: November 2004

Abstract

There is no consensus about the causes of the reduction in business cycle volatility seen in many major economies over the last decade. Using stylised models of the economies of the US, Euro area, UK and Japan, we argue that economic stability has been fostered by improved monetary policy and by associated changes in the behaviour of inflation, which has itself led to a reduction in the volatility of economic shocks. Assuming an absence of cataclysmic events, our projections suggest that most major economies should continue to enjoy an unusual degree of stability.

Keywords: growth volatility, inflation, stabilisation, business cycles, US, UK, Euro area, Japan

JEL Classification: E3, E52, F01

Suggested Citation

Martin, William Edward and Rowthorn, Bob, Will Stability Last? (November 2004). CESifo Working Paper Series No. 1324. Available at SSRN: https://ssrn.com/abstract=622601

William Edward Martin (Contact Author)

University of Cambridge - Faculty of Economics and Politics ( email )

Austin Robinson Building
Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom

London Metropolitan University - Finance Department ( email )

84 Moorgate
London, EC2M 6SQ
United Kingdom

Bob Rowthorn

University of Cambridge - Department of Applied Economics ( email )

Sidgwick Avenue
Cambridge, CB3 9DE
United Kingdom

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