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Assessing the Sources of Changes in the Volatility of Real Growth

In: The Changing Nature of the Business Cycle

Author

Listed:
  • Stephen G Cecchetti

    (Brandeis University)

  • Alfonso Flores-Lagunes

    (University of Arizona)

  • Stefan Krause

    (Emory University)

Abstract

In much of the world, growth is more stable than it once was. Looking at a sample of twentyfive countries, we find that in sixteen, real GDP growth is less volatile today than it was twenty years ago. And these declines are large, averaging more than fifty per cent. What accounts for the fact that real growth has been more stable in recent years? We survey the evidence and competing explanations and find support for the view that improved inventory management policies, coupled with financial innovation, adopting an inflation targeting scheme and increased central bank independence have all been associated with more stable real growth. Furthermore, we find weak evidence suggesting that increased commercial openness has coincided with increased output volatility.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Stephen G Cecchetti & Alfonso Flores-Lagunes & Stefan Krause, 2005. "Assessing the Sources of Changes in the Volatility of Real Growth," RBA Annual Conference Volume,in: Christopher Kent & David Norman (ed.), The Changing Nature of the Business Cycle Reserve Bank of Australia.
  • Handle: RePEc:rba:rbaacv:acv2005-06
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    business cycles; volatility; inventories; monetary policy; financial innovation; structural policies;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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