Declining Output Volatility: What Role for Structural Change?
AbstractThe decline in output volatility in a number of countries over the past few decades has been well-documented, though less agreement has been reached about the causes of this decline. In this paper, we use a panel of data from 20 OECD countries to see if there is a role for various indicators of structural reform in explaining the general decline in output volatility. We suggest that reforms in product and labour markets can reduce volatility of aggregate output by encouraging productive resources to shift more readily in response to differential shocks across firms and sectors. In contrast to other studies, we include direct measures of product market regulations and monetary policy regimes as indicators of structural reform. We find that less product market regulation and stricter monetary policy regimes have played a role in reducing output volatility. Our estimates are reasonably robust to a number of alternative specifications, including those that attempt to control for a possible trend in common (unexplained) innovations to output volatility such as a possible decline in the magnitude of global shocks.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Reserve Bank of Australia in its series RBA Research Discussion Papers with number rdp2005-08.
Date of creation: Oct 2005
Date of revision:
Find related papers by JEL classification:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-11-19 (All new papers)
- NEP-BEC-2005-11-19 (Business Economics)
- NEP-MAC-2005-11-19 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Richard Clarida & Jordi Galí & Mark Gertler, 2000.
"Monetary Policy Rules And Macroeconomic Stability: Evidence And Some Theory,"
The Quarterly Journal of Economics,
MIT Press, vol. 115(1), pages 147-180, February.
- Clarida, Richard & Galí, Jordi & Gertler, Mark, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," CEPR Discussion Papers 1908, C.E.P.R. Discussion Papers.
- Richard Clarida & Jordi Gali & Mark Gertler, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," NBER Working Papers 6442, National Bureau of Economic Research, Inc.
- Richard Clarida & Jordi Galí & Mark Gertler, 1997. "Monetary policy rules and macroeconomic stability: Evidence and some theory," Economics Working Papers 350, Department of Economics and Business, Universitat Pompeu Fabra, revised May 1999.
- Canova, Fabio & Dellas, Harris, 1993. "Trade interdependence and the international business cycle," Journal of International Economics, Elsevier, vol. 34(1-2), pages 23-47, February.
- Nigel Pain, 1996. "Continental Drift: European Integration and the Location of UK Foreign Direct Investment," NIESR Discussion Papers 230, National Institute of Economic and Social Research.
- Giuseppe Nicoletti & Stefano Scarpetta, 2003.
"Regulation, Productivity and Growth: OECD Evidence,"
OECD Economics Department Working Papers
347, OECD Publishing.
- Giuseppe Nicoletti & Stefano Scarpetta, 2003. "Regulation, productivity and growth: OECD evidence," Economic Policy, CEPR & CES & MSH, vol. 18(36), pages 9-72, 04.
- Nicoletti, Giuseppe & Scarpetta, Stefano, 2003. "Regulation, productivity, and growth : OECD evidence," Policy Research Working Paper Series 2944, The World Bank.
- Margaret M. McConnell & Patricia C. Mosser & Gabriel Perez Quiros, 1999. "A decomposition of the increased stability of GDP growth," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 5(Aug).
- Christina D. Romer, 1999.
"Changes in Business Cycles: Evidence and Explanations,"
Journal of Economic Perspectives,
American Economic Association, vol. 13(2), pages 23-44, Spring.
- Christina D. Romer, 1999. "Changes in Business Cycles: Evidence and Explanations," NBER Working Papers 6948, National Bureau of Economic Research, Inc.
- Diego A. Comin & Thomas Philippon, 2006.
"The Rise in Firm-Level Volatility: Causes and Consequences,"
in: NBER Macroeconomics Annual 2005, Volume 20, pages 167-228
National Bureau of Economic Research, Inc.
- Diego Comin & Thomas Philippon, 2005. "The Rise in Firm-Level Volatility: Causes and Consequences," NBER Working Papers 11388, National Bureau of Economic Research, Inc.
- Stephen G. Cecchetti & Alfonso Flores-Lagunes & Stefan Krause, 2004.
"Has Monetary Policy Become More Efficient? A Cross Country Analysis,"
NBER Working Papers
10973, National Bureau of Economic Research, Inc.
- Stephen G. Cecchetti & Alfonso Flores-Lagunes & Stefan Krause, 2006. "Has Monetary Policy become more Efficient? a Cross-Country Analysis," Economic Journal, Royal Economic Society, vol. 116(511), pages 408-433, 04.
- Olivier Blanchard & John Simon, 2001. "The Long and Large Decline in U.S. Output Volatility," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(1), pages 135-174.
- Ray Barell & Sylvia Gottschalk, 2004. "The Volatility of the Output Gap in the G7," National Institute Economic Review, National Institute of Economic and Social Research, vol. 188(1), pages 100-107, April.
- Thomas Dalsgaard & Jørgen Elmeskov & Cyn-Young Park, 2002.
"Ongoing Changes in the Business Cycle: Evidence and Causes,"
OECD Economics Department Working Papers
315, OECD Publishing.
- Thomas Dalsgaard & Jørgen Elmeskov & Cyn-Young Park, 2002. "Ongoing changes in the business cycle - evidence and causes," SUERF Studies, SUERF - The European Money and Finance Forum, number 20 edited by Morten Balling.
- John Simon, 2001. "The Decline in Australian Output Volatility," RBA Research Discussion Papers rdp2001-01, Reserve Bank of Australia.
- Markus Hyvonen, 2004. "Inflation Convergence Across Countries," RBA Research Discussion Papers rdp2004-04, Reserve Bank of Australia.
- Canova, Fabio & Marrinan, Jane, 1998. "Sources and propagation of international output cycles: Common shocks or transmission?," Journal of International Economics, Elsevier, vol. 46(1), pages 133-166, October.
- Giuseppe Nicoletti & Andrea Bassanini & Ekkehard Ernst & Sébastien Jean & Paulo Santiago & Paul Swaim, 2001. "Product and Labour Markets Interactions in OECD Countries," OECD Economics Department Working Papers 312, OECD Publishing.
- James A. Kahn & Margaret M. McConnell & Gabriel Perez-Quiros, 2002. "On the causes of the increased stability of the U.S. economy," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 183-202.
- Michael D. Bordo & Anna J. Schwartz, 1997.
"Monetary Policy Regimes and Economic Performance: The Historical Record,"
NBER Working Papers
6201, National Bureau of Economic Research, Inc.
- Bordo, Michael D. & Schwartz, Anna J., 1999. "Monetary policy regimes and economic performance: The historical record," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 3, pages 149-234 Elsevier.
- Ray Barrell & Sylvia Gottschalk, 2004. "The Volatility Of The Output Gap In The G7," Royal Economic Society Annual Conference 2004 136, Royal Economic Society.
- Keith Sill, 2004. "What accounts for the postwar decline in economic volatility?," Business Review, Federal Reserve Bank of Philadelphia, issue Q1, pages 23-31.
- Stefan Krause & Felix Rioja, 2006. "Financial Development and Monetary Policy Efficiency," Emory Economics 0613, Department of Economics, Emory University (Atlanta).
- Dan Andrews & Daniel Rees, 2009. "Macroeconomic Volatility and Terms of Trade Shocks," RBA Research Discussion Papers rdp2009-05, Reserve Bank of Australia.
- Rochelle Belkar & Lynne Cockerell & Christopher Kent, 2007. "Current Account Deficits: The Australian Debate," RBA Research Discussion Papers rdp2007-02, Reserve Bank of Australia.
- Klomp, Jeroen & de Haan, Jakob, 2009. "Political institutions and economic volatility," European Journal of Political Economy, Elsevier, vol. 25(3), pages 311-326, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paula Drew).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.