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The decline in volatility in the US economy. A historical perspective

Author

Listed:
  • María Dolores Gadea
  • Ana Gómez-Loscos
  • Gabriel Pérez-Quirós

Abstract

In this paper, we analyse the volatility of US GDP growth using quarterly series starting in 1875. We find structural breaks in volatility at the end of World War II and at the beginning of the Great Moderation period. We show that the Great Moderation volatility reduction is only linked to changes in expansions, whereas that after World War II is due to changes in both expansions and recessions. We also propose several methodologies to date the US business cycle in this long period. We find that taking volatility into account improves the characterization of the business cycle.

Suggested Citation

  • María Dolores Gadea & Ana Gómez-Loscos & Gabriel Pérez-Quirós, 2020. "The decline in volatility in the US economy. A historical perspective," Oxford Economic Papers, Oxford University Press, vol. 72(1), pages 101-123.
    • Handle: RePEc:oup:oxecpp:v:72:y:2020:i:1:p:101-123.
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    File URL: http://hdl.handle.net/10.1093/oep/gpz030
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    Cited by:

    1. González-Álvarez, María A. & Montañés, Antonio, 2023. "CO2 emissions, energy consumption, and economic growth: Determining the stability of the 3E relationship," Economic Modelling, Elsevier, vol. 121(C).

    More about this item

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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