Have economic fluctuations been dampened? New empirical evidence from Italy

Using new series of aggregate and disaggregate output, this paper examines the historical pattern of volatility of economic fluctuations in Italy. Results evidence a higher stability in the postwar era, with respect to both the prewar and the interwar periods. Evidence is provided that the higher degree of stabilization of the Italian business cycle cannot be entirely attributed to the shift in the composition of aggregate output from more to less cyclical sectors. It is shown, however, that although the sign of the change in volatility is invariant to the filter adopted for the decomposition into trend and cycle, this is not true for both its size and statistical significance.