THE SOURCES OF THE DECLINE IN U.S. OUTPUT VOLATILITY |
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| Authors: | KYONGWOOK CHOI CHULHO JUNG |
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| Affiliation: | Choi:;Assistant Professor, Department of Economics, Ohio University, 333 Bentley Hall Annex, Athens, OH 45701. Phone 1-740-593-2051 and 1-740-274-1741, Fax 1-740-593-0181, E-mail
Jung:;Professor, Department of Economics, Ohio University, 353 Bentley Hall Annex, Athens, OH 45701. Phone 1-740-593-2041, Fax 1-740-593-0181, E-mail |
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| Abstract: | 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) |
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