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The Decline in Australian Output Volatility

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  • John Simon

    (Reserve Bank of Australia)

Abstract

There has been a large decline in the volatility of Australian output over the past 40 years. This paper looks at the causes of this decline. Accounting for part of the change have been substantial changes in the inventories cycle. Abstracting from changes in the inventories cycle there have also been significant declines in underlying output volatility. This paper focuses on the underlying structural factors for the reduction in volatility. It finds that the principal cause of the decline has been a decline in the shocks hitting the economy rather than an increase in structural stability. Furthermore, the primary explanation seems to lie in a reduction in the volatility of supply or ‘productivity’ shocks. The ultimate source of these productivity shocks is left as an open question.

Suggested Citation

  • John Simon, 2001. "The Decline in Australian Output Volatility," RBA Research Discussion Papers rdp2001-01, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp2001-01
    as

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    File URL: https://www.rba.gov.au/publications/rdp/2001/pdf/rdp2001-01.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    business cycles; output growth; structural VAR; volatility;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions

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