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The decline in volatility of US GDP growth

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  • Daniel Burren
  • Klaus Neusser

Abstract

The decline in volatility of US Gross Domestic Product (GDP) growth is a well-known stylized fact of post WWII macroeconomic data. Economists call this observation the Great Moderation. This article contributes to the discussion whether the drop in GDP volatility was a one-time break or a trend decrease (Blanchard and Simon, 2001; Fang and Miller, 2007). We provide evidence for a nonlinear time trend in the volatility of GDP growth and give support for the hypothesis that the 1970s were special in the sense of Blanchard and Simon (2001).

Suggested Citation

  • Daniel Burren & Klaus Neusser, 2010. "The decline in volatility of US GDP growth," Applied Economics Letters, Taylor & Francis Journals, vol. 17(16), pages 1625-1631.
    • Handle: RePEc:taf:apeclt:v:17:y:2010:i:16:p:1625-1631
    DOI: 10.1080/13504850903085050
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    References listed on IDEAS

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    1. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    2. Andrews, Donald W K & Ploberger, Werner, 1994. "Optimal Tests When a Nuisance Parameter Is Present Only under the Alternative," Econometrica, Econometric Society, vol. 62(6), pages 1383-1414, November.
    3. Margaret M. McConnell & Gabriel Perez-Quiros, 2000. "Output fluctuations in the United States: what has changed since the early 1980s?," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
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    Cited by:

    1. Andreas Brunhart, 2013. "Der Klein(st)staat Liechtenstein und seine grossen Nachbarländer: Eine wachstums- und konjunkturanalytische Gegenüberstellung," Arbeitspapiere 44, Liechtenstein-Institut.
    2. Andreas Brunhart, 2014. "Stock Market's Reactions to Revelation of Tax Evasion: An Empirical Assessment," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 150(III), pages 161-190, September.

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