IDEAS home Printed from https://ideas.repec.org/p/fip/fednsr/41.html
   My bibliography  Save this paper

Output fluctuations in the United States: what has changed since the early 1980s?

Author

Listed:
  • Margaret M. McConnell
  • Gabriel Perez-Quiros

Abstract

We document a structural break in the volatility of U.S. GDP growth in the first quarter of 1984, and provide evidence that this break emanates from a reduction in the volatility of durable goods production. We find no evidence of increased stability in the nondurables, services or structures sectors of the economy. In addition, no other G7 country experienced a contemporaneous reduction in output volatility. Finally, we show that the reduction in durables volatility corresponds to a decline in the share of durable goods accounted for by inventories

Suggested Citation

  • Margaret M. McConnell & Gabriel Perez-Quiros, 1998. "Output fluctuations in the United States: what has changed since the early 1980s?," Staff Reports 41, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:41
    as

    Download full text from publisher

    File URL: https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr41.pdf
    Download Restriction: no
    File URL: https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr41.html
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. J. Bradford DeLong & Lawrence H. Summers, 1986. "The Changing Cyclical Variability of Economic Activity in the United States," NBER Chapters, in: The American Business Cycle: Continuity and Change, pages 679-734, National Bureau of Economic Research, Inc.
    2. Diebold, Francis X & Rudebusch, Glenn D, 1992. "Have Postwar Economic Fluctuations Been Stabilized?," American Economic Review, American Economic Association, vol. 82(4), pages 993-1005, September.
    3. Richard Clarida & Jordi Galí & Mark Gertler, 2000. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," The Quarterly Journal of Economics, Oxford University Press, vol. 115(1), pages 147-180.
    4. Arturo Estrella & Frederic S. Mishkin, 1998. "Predicting U.S. Recessions: Financial Variables As Leading Indicators," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 45-61, February.
    5. Eric Ghysels, 1993. "A time series model with periodic stochastic regime switching," Discussion Paper / Institute for Empirical Macroeconomics 84, Federal Reserve Bank of Minneapolis.
    6. Watson, Mark W, 1994. "Business-Cycle Durations and Postwar Stabilization of the U.S. Economy," American Economic Review, American Economic Association, vol. 84(1), pages 24-46, March.
    7. Shapiro, Matthew D, 1988. "The Stabilization of the U.S. Economy: Evidence from the Stock Marke t," American Economic Review, American Economic Association, vol. 78(5), pages 1067-1079, December.
    8. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-384, March.
    9. Filardo, Andrew J, 1994. "Business-Cycle Phases and Their Transitional Dynamics," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(3), pages 299-308, July.
    10. Sichel, Daniel E, 1994. "Inventories and the Three Phases of the Business Cycle," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(3), pages 269-277, July.
    11. Phillips, Kerk L., 1991. "A two-country model of stochastic output with changes in regime," Journal of International Economics, Elsevier, vol. 31(1-2), pages 121-142, August.
    12. Hamilton, James D & Perez-Quiros, Gabriel, 1996. "What Do the Leading Indicators Lead?," The Journal of Business, University of Chicago Press, vol. 69(1), pages 27-49, January.
    13. Hansen, Bruce E, 1997. "Approximate Asymptotic P Values for Structural-Change Tests," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(1), pages 60-67, January.
    14. Andrews, Donald W K & Ploberger, Werner, 1994. "Optimal Tests When a Nuisance Parameter Is Present Only under the Alternative," Econometrica, Econometric Society, vol. 62(6), pages 1383-1414, November.
    15. Boldin, Michael D, 1994. "Dating Turning Points in the Business Cycle," The Journal of Business, University of Chicago Press, vol. 67(1), pages 97-131, January.
    16. Hansen, Bruce E, 1996. "Erratum: The Likelihood Ratio Test under Nonstandard Conditions: Testing the Markov Switching Model of GNP," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(2), pages 195-198, March-Apr.
    17. Andrew J. Filardo, 1997. "Cyclical implications of the declining manufacturing employment share," Economic Review, Federal Reserve Bank of Kansas City, vol. 82(Q II), pages 63-87.
    18. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    19. Durland, J Michael & McCurdy, Thomas H, 1994. "Duration-Dependent Transitions in a Markov Model of U.S. GNP Growth," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(3), pages 279-288, July.
    20. Donald S. Allen, 1995. "Changes in inventory management and the business cycle," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 17-26.
    21. Ramey, Valerie A. & West, Kenneth D., 1999. "Inventories," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 13, pages 863-923, Elsevier.
    22. Ramey, Garey & Ramey, Valerie A, 1995. "Cross-Country Evidence on the Link between Volatility and Growth," American Economic Review, American Economic Association, vol. 85(5), pages 1138-1151, December.
    23. Romer, Christina, 1986. "Spurious Volatility in Historical Unemployment Data," Journal of Political Economy, University of Chicago Press, vol. 94(1), pages 1-37, February.
    24. Hess, Gregory D & Iwata, Shigeru, 1997. "Measuring and Comparing Business-Cycle Features," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(4), pages 432-444, October.
    25. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-856, July.
    26. Hansen, Bruce E., 1992. "Testing for parameter instability in linear models," Journal of Policy Modeling, Elsevier, vol. 14(4), pages 517-533, August.
    27. Donald P. Morgan, 1991. "Will just-in-time inventory techniques dampen recessions?," Economic Review, Federal Reserve Bank of Kansas City, vol. 76(Mar), pages 21-33.
    28. Chang-Jin Kim & Christian J. Murray, 2002. "Permanent and transitory components of recessions," Empirical Economics, Springer, vol. 27(2), pages 163-183.
    29. Hansen, B.E., 1991. "The Likelihood Test Under Non-Standard Conditions: Testing the Markov Trend Model of GNP," RCER Working Papers 279, University of Rochester - Center for Economic Research (RCER).
    30. Chang-Jin Kim & Charles R. Nelson, 1999. "Has The U.S. Economy Become More Stable? A Bayesian Approach Based On A Markov-Switching Model Of The Business Cycle," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 608-616, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Maximo Camacho, 2004. "Vector smooth transition regression models for US GDP and the composite index of leading indicators," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 23(3), pages 173-196.
    2. Chevallier, Julien, 2011. "Evaluating the carbon-macroeconomy relationship: Evidence from threshold vector error-correction and Markov-switching VAR models," Economic Modelling, Elsevier, vol. 28(6), pages 2634-2656.
    3. Masaru Chiba, 2023. "Robust and efficient specification tests in Markov-switching autoregressive models," Statistical Inference for Stochastic Processes, Springer, vol. 26(1), pages 99-137, April.
    4. JONATHAN McCARTHY & EGON ZAKRAJSEK, 2007. "Inventory Dynamics and Business Cycles: What Has Changed?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(2-3), pages 591-613, March.
    5. Mike Artis & Hans-Martin Krolzig & Juan Toro, 2004. "The European business cycle," Oxford Economic Papers, Oxford University Press, vol. 56(1), pages 1-44, January.
    6. M Sensier & D van Dijk, 2001. "Short-term Volatility Versus Long-term Growth: Evidence in US Macroeconomic Time Series," Economics Discussion Paper Series 0103, Economics, The University of Manchester.
    7. Diebold, Francis X & Rudebusch, Glenn D, 1996. "Measuring Business Cycles: A Modern Perspective," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 67-77, February.
    8. Chevallier, Julien, 2011. "A model of carbon price interactions with macroeconomic and energy dynamics," Energy Economics, Elsevier, vol. 33(6), pages 1295-1312.
    9. Matteo Manera & Alessandro Cologni, 2006. "The Asymmetric Effects of Oil Shocks on Output Growth: A Markov-Switching Analysis for the G-7 Countries," Working Papers 2006.29, Fondazione Eni Enrico Mattei.
    10. Layton, Allan P. & Smith, Daniel R., 2007. "Business cycle dynamics with duration dependence and leading indicators," Journal of Macroeconomics, Elsevier, vol. 29(4), pages 855-875, December.
    11. repec:pit:wpaper:214 is not listed on IDEAS
    12. Benati, Luca, 2007. "Drift and breaks in labor productivity," Journal of Economic Dynamics and Control, Elsevier, vol. 31(8), pages 2847-2877, August.
    13. Marjan Petreski, 2010. "An Overhaul of a Doctrine: Has Inflation Targeting Opened a New Era in Developing-country Peggers?," FIW Working Paper series 057, FIW.
    14. Penelope A. Smith & Peter M. Summers, 2005. "How well do Markov switching models describe actual business cycles? The case of synchronization," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(2), pages 253-274.
    15. Mili, Mehdi & Sahut, Jean-Michel & Teulon, Frédéric, 2012. "Non linear and asymmetric linkages between real growth in the Euro area and global financial market conditions: New evidence," Economic Modelling, Elsevier, vol. 29(3), pages 734-741.
    16. Billio, Monica & Casarin, Roberto & Ravazzolo, Francesco & van Dijk, Herman K., 2012. "Combination schemes for turning point predictions," The Quarterly Review of Economics and Finance, Elsevier, vol. 52(4), pages 402-412.
    17. van Dijk, D.J.C. & Osborn, D.R. & Sensier, M., 2002. "Changes in variability of the business cycle in the G7 countries," Econometric Institute Research Papers EI 2002-28, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    18. Maximo Camacho & Gabriel Perez-Quiros, 2002. "This is what the leading indicators lead," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 17(1), pages 61-80.
    19. , & Stein, Tobias, 2021. "Equity premium predictability over the business cycle," CEPR Discussion Papers 16357, C.E.P.R. Discussion Papers.
    20. Hans-Martin Krolzig & Juan Toro, 2004. "Classical and modern business cycle measurement: The European case," Spanish Economic Review, Springer;Spanish Economic Association, vol. 7(1), pages 1-21, January.
    21. Beatriz C. Galvao, Ana, 2002. "Can non-linear time series models generate US business cycle asymmetric shape?," Economics Letters, Elsevier, vol. 77(2), pages 187-194, October.

    More about this item

    Keywords

    Production (Economic theory); Gross domestic product;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fednsr:41. 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: . General contact details of provider: https://edirc.repec.org/data/frbnyus.html .

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Gabriella Bucciarelli (email available below). General contact details of provider: https://edirc.repec.org/data/frbnyus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.