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Short-term volatility versus long-term growth: evidence in US macroeconomic time series

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  • Sensier, M.
  • van Dijk, D.J.C.

Abstract

We test for a change in the volatility of 215 US macroeconomic time series over the period 1960-1996. We find that about 90\\% of these series have experienced a break in volatility during this period. This result is robust to controlling for instability in the mean and business cycle nonlinearities. Real variables have seen a reduction in volatility since the early 1980s, which is accompanied by lower but steadier output growth. Furthermore, nominal variables have seen temporary increases in their volatility around the early 1980s. This suggests the existence of a trade-off between short-term volatility and the long-term pattern of growth.

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Bibliographic Info

Paper provided by Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute in its series Econometric Institute Research Papers with number EI 2001-11.

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Date of creation: 30 Mar 2001
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Handle: RePEc:ems:eureir:1674

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Related research

Keywords: Business cycle nonlinearity; Structural change tests; Volatility; growth;

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References

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Citations

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Cited by:
  1. James H. Stock & Mark W. Watson, 2002. "Has the Business Cycle Changed and Why?," NBER Working Papers 9127, National Bureau of Economic Research, Inc.
  2. JONATHAN McCARTHY & EGON ZAKRAJSEK, 2007. "Inventory Dynamics and Business Cycles: What Has Changed?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(2-3), pages 591-613, 03.
  3. D van Dijk & D R Osborn & M Sensier, 2002. "Changes in variability of the business cycle in the G7 countries," The School of Economics Discussion Paper Series 0204, Economics, The University of Manchester.
  4. Magda Kandil, 2006. "Asymmetric Effects Of Aggregate Demand Shocks Across U.S. Industries: Evidence And Implications," Eastern Economic Journal, Eastern Economic Association, vol. 32(2), pages 259-283, Spring.
  5. Chauvet, Marcelle & Potter, Simon, 2001. "Recent Changes in the US Business Cycle," Manchester School, University of Manchester, vol. 69(5), pages 481-508, Special I.
  6. Ana Maria Herrero & Elena Pesavento, 2003. "The Decline in U.S. Output Volatility: Structural Changes in Inventories or Sales?," Emory Economics 0301, Department of Economics, Emory University (Atlanta).
  7. Lazzarini, S. G. & Madalozzo, R. C & Artes, R. & Siqueira, J. O., 2004. "Measuring trust: An experiment in Brazil," Insper Working Papers wpe_42, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
  8. James H. Stock & Mark W. Watson, 2003. "Has the business cycle changed?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 9-56.
  9. Jean-Yves Pitarakis, 2003. "Least Squares Estimation and Tests of Breaks in Mean and Variance under Misspecification," Econometrics 0312004, EconWPA.

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