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THE SOURCES OF THE DECLINE IN U.S. OUTPUT VOLATILITY
Author(s) -
CHOI KYONGWOOK,
JUNG CHULHO
Publication year - 2008
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1111/j.1465-7287.2007.00053.x
Subject(s) - economics , volatility (finance) , counterfactual thinking , econometrics , luck , structural vector autoregression , structural break , monetary economics , vector autoregression , demand shock , macroeconomics , monetary policy , philosophy , theology , epistemology
In this paper, we investigate the sources of the decline in U.S. output volatility. We estimate structural vector autoregression models before and after the structural break date of the first quarter of 1984. We find that the magnitude of both supply and demand shocks in the pre‐1984 period is greater than that in the post‐1984 period. We also find that the relative importance of the demand shocks in the post‐1984 has decreased drastically compared to the pre‐1984 period. Further counterfactual analyses show that good luck, good policies, and better business practices might have played a role in reducing U.S. output volatility. ( JEL E30, E60, C32)