Recent U.S. Macroeconomic Stability: Good Policies, Good Practices, or Good Luck?

Shaghil Ahmed; Andrew Levin; Beth Anne Wilson

doi:10.1162/0034653041811662

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Recent U.S. Macroeconomic Stability: Good Policies, Good Practices, or Good Luck?

Shaghil Ahmed^1,2; Andrew Levin^1,2; Beth Anne Wilson^1,2

¹ Federal Reserve · ² Federal Reserve Board of Governors

The Review of Economics and Statistics 2004 open access

The volatility of U.S. real GDP growth since 1984 has been markedlylowerthanoverthepreviousquartercentury.Weutilizefrequency-domain and VAR methods to distinguish among competing explanations for this reduction: improvements in monetary policy, better business practices, and a fortuitous reduction in exogenous disturbances. We find that reduced innovation variances account for much of the decline in aggregate output volatility, suggesting that good luck is the most likely explanation. Good practices and good policy appear to have played a more important role in explaining the post-1984 decline in the volatility of consumer price inflation.

DOI: 10.1162/0034653041811662
Volume: 86 (3)
Pages: 824-832
Language: en
Export: BibTeX
Sources: crossref openalex