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The Less-Volatile U.S. Economy: A Bayesian Investigation of Timing, Breadth, and Potential Explanations

Author

Listed:
  • Kim, Chang-Jin
  • Nelson, Charles R
  • Piger, Jeremy

Abstract

Using a Bayesian model comparison strategy, we search for a volatility reduction in U.S. real gross domestic product (GDP) growth within the postwar sample. We find that aggregate real GDP growth has been less volatile since the early 1980s, and that this volatility reduction is concentrated in the cyclical component of real GDP. Sales and production growth in many of the components of real GDP display similar reductions in volatility, suggesting the aggregate volatility reduction does not have a narrow source. We also document structural breaks in inflation dynamics that occurred over a similar time frame as the GDP volatility reduction.

Suggested Citation

  • Kim, Chang-Jin & Nelson, Charles R & Piger, Jeremy, 2004. "The Less-Volatile U.S. Economy: A Bayesian Investigation of Timing, Breadth, and Potential Explanations," Journal of Business & Economic Statistics, American Statistical Association, vol. 22(1), pages 80-93, January.
    • Handle: RePEc:bes:jnlbes:v:22:y:2004:i:1:p:80-93
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