Recent U.S. macroeconomic stability: good policies, good practices or good luck?
AbstractThe volatility of U.S. real GDP growth since 1984 has been markedly lower than that over the previous quarter-century. In this paper, we utilize frequency-domain and VAR methods to distinguish among several competing explanations for this phenomenon: improvements in monetary policy, better business practices, and a fortuitous reduction in exogenous disturbances. We find that reduced innovation variances account for much of the decline in aggregate output volatility. Our results support the "good-luck" hypothesis as the leading explanation for the decline in aggregate output volatility, although "good-practices" and "good-policy" are also contributing factors. Applying the same methods to consumer price inflation, we find that the post-1984 decline in inflation volatility can be attributed largely to improvements in monetary policy.
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Bibliographic InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 730.
Date of creation: 2002
Date of revision:
Other versions of this item:
- Shaghil Ahmed & Andrew Levin & Beth Anne Wilson, 2004. "Recent U.S. Macroeconomic Stability: Good Policies, Good Practices, or Good Luck?," The Review of Economics and Statistics, MIT Press, vol. 86(3), pages 824-832, August.
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- 'A Century of U.S. Central Banking: Goals, Frameworks, Accountability'
by Mark Thoma in Economist's View on 2013-07-10 13:48:26
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