IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Will Stability Last?

  • William Martin
  • Robert Rowthorn
Registered author(s):

    There is no consensus about the causes of the reduction in business cycle volatility seen in many major economies over the last decade. Using stylised models of the economies of the US, Euro area, UK and Japan, we argue that economic stability has been fostered by improved monetary policy and by associated changes in the behaviour of inflation, which has itself led to a reduction in the volatility of economic shocks. Assuming an absence of cataclysmic events, our projections suggest that most major economies should continue to enjoy an unusual degree of stability.

    If 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.

    File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2004/wp-cesifo-2004-11/cesifo1_wp1324.pdf
    Download Restriction: no

    Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1324.

    as
    in new window

    Length:
    Date of creation: 2004
    Date of revision:
    Handle: RePEc:ces:ceswps:_1324
    Contact details of provider: Postal: Poschingerstrasse 5, 81679 Munich
    Phone: +49 (89) 9224-0
    Fax: +49 (89) 985369
    Web page: http://www.cesifo.de
    Email:


    More information through EDIRC

    References listed on IDEAS
    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.:

    as in new window
    1. Svensson, L-E-O, 1996. "Inflation Forecast Targeting : Implementaing and Monitoring Inflation Targets," Papers 615, Stockholm - International Economic Studies.
    2. Fatás, Antonio & Mihov, Ilian, 1999. "Government Size and Automatic Stabilizers: International and Intranational Evidence," CEPR Discussion Papers 2259, C.E.P.R. Discussion Papers.
    3. 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.
    4. M. Ayhan Kose & Kei-Mu Yi, 2002. "The trade comovement problem in international macroeconomics," Staff Reports 155, Federal Reserve Bank of New York.
    5. Herrera, Ana Maria & Pesavento, Elena, 2005. "The Decline in U.S. Output Volatility: Structural Changes and Inventory Investment," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 462-472, October.
    6. Orphanides, Athanasios & Williams, John C., 2004. "The decline of activist stabilization policy: Natural rate misperceptions, learning, and expectations," CFS Working Paper Series 2004/24, Center for Financial Studies (CFS).
    7. Nelson, Edward & Nikolov, Kalin, 2004. "Monetary Policy and Stagflation in the UK," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(3), pages 293-318, June.
    8. Timothy Cogley & Thomas J. Sargent, 2003. "Drifts and volatilities: monetary policies and outcomes in the post WWII U.S," Working Paper 2003-25, Federal Reserve Bank of Atlanta.
    9. Batini, Nicoletta & Nelson, Edward, 2001. "The Lag from Monetary Policy Actions to Inflation: Friedman Revisited," International Finance, Wiley Blackwell, vol. 4(3), pages 381-400, Winter.
    10. Ayhan Kose, M. & Otrok, Christopher & Whiteman, Charles H., 2008. "Understanding the evolution of world business cycles," Journal of International Economics, Elsevier, vol. 75(1), pages 110-130, May.
    11. Jonathan Heathcote & Fabrizio Perri, 2003. "Why Has the U.S. Economy Become Less Correlated with the Rest of the World?," American Economic Review, American Economic Association, vol. 93(2), pages 63-69, May.
    12. Levin, Andrew T. & Piger, Jeremy M., 2004. "Is inflation persistence intrinsic in industrial economies?," Working Paper Series 0334, European Central Bank.
    13. Coenen, Günter & Wieland, Volker, 2002. "Inflation dynamics and international linkages: a model of the United States, the euro area and Japan," Working Paper Series 0181, European Central Bank.
    14. Romer, Christina, 1986. "New Estimates of Prewar Gross National Product and Unemployment," The Journal of Economic History, Cambridge University Press, vol. 46(02), pages 341-352, June.
    15. Jean Boivin & Marc P. Giannoni, 2006. "Has Monetary Policy Become More Effective?," The Review of Economics and Statistics, MIT Press, vol. 88(3), pages 445-462, August.
    16. Stephen G. Cecchetti & Michael Ehrmann, 2002. "Does Inflation Targeting Increase Output Volatility?: An International Comparison of Policymakers' Preferences and Outcomes," Central Banking, Analysis, and Economic Policies Book Series, in: Norman Loayza & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series (ed.), Monetary Policy: Rules and Transmission Mechanisms, edition 1, volume 4, chapter 9, pages 247-274 Central Bank of Chile.
    17. Christopher J. Erceg and Andrew T. Levin, 2001. "Imperfect Credibility and Inflation Persistence," Computing in Economics and Finance 2001 19, Society for Computational Economics.
    18. Jonathan Heathcote, 2003. "Financial Globalization and Real Regionalization," Working Papers gueconwpa~03-03-20, Georgetown University, Department of Economics.
    19. Thomas Dalsgaard & Jørgen Elmeskov & Cyn-Young Park, 2002. "Ongoing Changes in the Business Cycle – Evidence and Causes," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
    20. Richard Clarida & Jordi Gali & Mark Gertler, 1997. "Monetary Policy Rules in Practice: Some International Evidence," NBER Working Papers 6254, National Bureau of Economic Research, Inc.
    21. D van Dijk & D R Osborn & M Sensier, 2002. "Changes in variability of the business cycle in the G7 countries," The School of Economics Discussion Paper Series 0204, Economics, The University of Manchester.
    22. Alan Auerbach, 2002. "Is There a Role for Discretionary Fiscal Policy?," NBER Working Papers 9306, National Bureau of Economic Research, Inc.
    23. Svensson, Lars E.O. & Rudebusch , Glenn, 1998. "Policy Rules for Inflation Targeting," Seminar Papers 637, Stockholm University, Institute for International Economic Studies.
    24. 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.
    25. Bergman, U. Michael & Bordo, Michael D. & Jonung, Lars, 1998. "Historical Evidence on Business Cycles: The International Experience," SSE/EFI Working Paper Series in Economics and Finance 255, Stockholm School of Economics.
    26. Michael D. Bordo & Thomas Helbling, 2003. "Have National Business Cycles Become More Synchronized?," NBER Working Papers 10130, National Bureau of Economic Research, Inc.
    27. Dieter Gerdesmeier & Barbara Roffia, 2004. "Empirical Estimates of Reaction Functions for the Euro Area," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 140(I), pages 37-66, March.
    28. Balke, Nathan S & Gordon, Robert J, 1989. "The Estimation of Prewar Gross National Product: Methodology and New Evidence," Journal of Political Economy, University of Chicago Press, vol. 97(1), pages 38-92, February.
    29. Luca Benati, 2008. "Investigating Inflation Persistence Across Monetary Regimes," The Quarterly Journal of Economics, MIT Press, vol. 123(3), pages 1005-1060, August.
    30. James H. Stock & Mark W. Watson, 2002. "Has the Business Cycle Changed and Why?," NBER Working Papers 9127, National Bureau of Economic Research, Inc.
    31. Jean Imbs, 2004. "Trade, Finance, Specialization, and Synchronization," The Review of Economics and Statistics, MIT Press, vol. 86(3), pages 723-734, August.
    32. Marcelle Chauvet & Simon Potter, 2001. "Recent changes in the U.S. business cycle," Staff Reports 126, Federal Reserve Bank of New York.
    33. Nicoletta Batini, 2006. "Euro area inflation persistence," Empirical Economics, Springer, vol. 31(4), pages 977-1002, November.
    34. Bean, Charles, 1998. "The New UK Monetary Arrangements: A View from the Literature," Economic Journal, Royal Economic Society, vol. 108(451), pages 1795-1809, November.
    35. 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.
    36. Penelope A. Smith & Peter M. Summers, 2002. "Regime Switches in GDP Growth and Volatility: Some International Evidence and Implications for Modelling Business Cycles," Melbourne Institute Working Paper Series wp2002n21, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    37. 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).
    38. John B. Taylor, 1999. "A Historical Analysis of Monetary Policy Rules," NBER Chapters, in: Monetary Policy Rules, pages 319-348 National Bureau of Economic Research, Inc.
    39. Claudia M. Buch & Jörg Döpke & Christian Pierdzioch, 2002. "Financial Openness and Business Cycle Volatility," Kiel Working Papers 1121, Kiel Institute for the World Economy.
    40. Koichiro Kamada & Ichiro Muto, 2000. "Forward-looking Models and Monetary Policy in Japan," Bank of Japan Working Paper Series Research and Statistics D, Bank of Japan.
    41. Jonathan McCarthy & Egon Zakrajsek, 2002. "Inventory dynamics and business cycles: what has changed?," Staff Reports 156, Federal Reserve Bank of New York.
    42. Chang-Jin Kim & Charles Nelson & Jeremy Piger, 2001. "The less volatile U.S. economy: a Bayesian investigation of timing, breadth, and potential explanations," International Finance Discussion Papers 707, Board of Governors of the Federal Reserve System (U.S.).
    43. Robert B. Barsky & Lutz Kilian, 2001. "Do We Really Know that Oil Caused the Great Stagflation? A Monetary Alternative," NBER Working Papers 8389, National Bureau of Economic Research, Inc.
    44. Darrel Cohen & Glenn Follette, 2000. "The automatic fiscal stabilizers: quietly doing their thing," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 35-67.
    45. Charles Bean, 2003. "Asset Prices, Financial Imbalances and Monetary Policy: Are Inflation Targets Enough?," RBA Annual Conference Volume, in: Anthony Richards & Tim Robinson (ed.), Asset Prices and Monetary Policy Reserve Bank of Australia.
    46. James H. Stock & Mark W. Watson, 2003. "Understanding Changes in International Business Cycle Dynamics," NBER Working Papers 9859, National Bureau of Economic Research, Inc.
    47. Claudia M. Buch & Joerg Doepke & Christian Pierdzioch, 2004. "Business Cycle Volatility in Germany," German Economic Review, Verein für Socialpolitik, vol. 5(4), pages 451-479, November.
    48. Ball, Laurence, 1999. "Efficient Rules for Monetary Policy," International Finance, Wiley Blackwell, vol. 2(1), pages 63-83, April.
    49. 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.
    50. 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.
    51. Marco Terrones & Eswar Prasad & M. Ayhan Kose, 2003. "Financial Integration and Macroeconomic Volatility," IMF Working Papers 03/50, International Monetary Fund.
    52. Alexandre Debs, 2001. "Testing for a Structural Break in the Volatility of Real GDP Growth in Canada," Working Papers 01-9, Bank of Canada.
    53. Nelson Edward, 2005. "The Great Inflation of the Seventies: What Really Happened?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-50, July.
    54. Ormerod, Paul, 2002. "The US business cycle: power law scaling for interacting units with complex internal structure," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 314(1), pages 774-785.
    55. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
    56. Annabelle Mourougane & Hideyuki Ibaragi, 2004. "Is There a Change in the Trade-Off Between Output and Inflation at Low or Stable Inflation Rates?: Some Evidence in the Case of Japan," OECD Economics Department Working Papers 379, OECD Publishing.
    57. Brian M. Doyle & Jon Faust, 2005. "Breaks in the Variability and Comovement of G-7 Economic Growth," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 721-740, November.
    58. John Simon, 2001. "The Decline in Australian Output Volatility," RBA Research Discussion Papers rdp2001-01, Reserve Bank of Australia.
    59. Karras, Georgios & Song, Frank, 1996. "Sources of business-cycle volatility: An exploratory study on a sample of OECD countries," Journal of Macroeconomics, Elsevier, vol. 18(4), pages 621-637.
    60. Assaf Razin & Andrew Rose, 1992. "Business Cycle Volatility and Openness: An Exploratory Cross-Section Analysis," NBER Working Papers 4208, National Bureau of Economic Research, Inc.
    61. George A. Akerlof & William T. Dickens & George L. Perry, 2000. "Near-Rational Wage and Price Setting and the Long-Run Phillips Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(1), pages 1-60.
    62. M. V. Cacdac Warnock & Francis E. Warnock, 2000. "The declining volatility of U.S. employment: was Arthur Burns right?," International Finance Discussion Papers 677, Board of Governors of the Federal Reserve System (U.S.).
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_1324. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.