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Output Fluctuations in the United States: What Has Changed since the Early 1980's?

  • Gabriel Perez-Quiros
  • Margaret M. McConnell

We document a structural decline in the volatility of real U.S. GDP growth in the first quarter of 1984. As a means of understanding the dramatic volatility reduction, we decompose output growth by major product type and provide evidence that the break emanates from a reduction in the volatility of durable goods production. We further show that the break in durables is roughly coincident with a break in the proportion of durables accounted for by inventories. We note that the break in output volatility affects the implementation of a wide range of simulation and econometric techniques and offer one important illustration of this in the context of a regime-switching model of output growth.

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 90 (2000)
Issue (Month): 5 (December)
Pages: 1464-1476

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Handle: RePEc:aea:aecrev:v:90:y:2000:i:5:p:1464-1476
Note: DOI: 10.1257/aer.90.5.1464
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