Assessing the Sources of Changes in the Volatility of Real Growth

32 Pages Posted: 13 Apr 2006 Last revised: 24 Aug 2010

See all articles by Stephen G. Cecchetti

Stephen G. Cecchetti

Brandeis International Business School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Alfonso Flores-Lagunes

Syracuse University--Economics; Syracuse University--CPR; IZA, Bonn

Stefan Krause

Banque de France - Economic Study and Research Division; Sciences Po

Date Written: January 2006

Abstract

In much of the world, growth is more stable than it once was. Looking at a sample of twentyfive countries, we find that in sixteen, real GDP growth is less volatile today than it was twenty years ago. And these declines are large, averaging more than fifty per cent. What accounts for the fact that real growth has been more stable in recent years? We survey the evidence and competing explanations and find support for the view that improved inventory management policies, coupled with financial innovation, adopting an inflation targeting scheme and increased central bank independence have all been associated with more stable real growth. Furthermore, we find weak evidence suggesting that increased commercial openness has coincided with increased output volatility.

Suggested Citation

Cecchetti, Stephen G. and Flores-Lagunes, Alfonso and Krause, Stefan, Assessing the Sources of Changes in the Volatility of Real Growth (January 2006). NBER Working Paper No. w11946. Available at SSRN: https://ssrn.com/abstract=877451

Stephen G. Cecchetti (Contact Author)

Brandeis International Business School ( email )

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United States

National Bureau of Economic Research (NBER) ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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Alfonso Flores-Lagunes

Syracuse University--Economics ( email )

Syracuse, NY 13244-1020
United States

HOME PAGE: http://www.maxwell.syr.edu/econ/cpr/Alfonso_Flores_Lagunes/

Syracuse University--CPR ( email )

Syracuse, NY 13244
United States

HOME PAGE: http://www.maxwell.syr.edu/econ/cpr/Alfonso_Flores_Lagunes/

IZA, Bonn ( email )

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Germany

HOME PAGE: http://www.iza.org/profile?key=2305

Stefan Krause

Banque de France - Economic Study and Research Division ( email )

31, rue Croix des Petits Champs
75049 Paris Cedex 01
FRANCE

Sciences Po ( email )

27 rue Saint-Guillaume
Paris Cedex 07, 75337
France

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