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

By Shaghil Ahmed, Andrew T. Levin, B. Wilson. Review of Economics and Statistics, 2004

350 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/808d6452b4ed3bc03753825266a98cd030ce33cf

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Citations in the corpus

Has the Fed Been a Failure (2012, neutral): “20 See, among many other works on the topic, McConnell and Perez-Quiros (2000), Ahmed, Levin, and Wilson (2004), Alcala and Sancho (2004), Irvine and Schuh (2005), Dynan, Elmendorf, and Sichel (2006), Sims and Zha (2006), Arias, Hansen, and Ohanian (2007), Leduc and Sill (2007), Davis and Kahn…”
(Un)Predictability and Macroeconomic Stability (2006, neutral): “By construction, it takes values in the interval [-1, 1].”
Monetary Policy and Inflation Dynamics (2004, neutral): “However, as in other recent work (Stock and Watson 2002; Ahmed, Levin, and Wilson 2004 ), changes in policy account for a smaller proportion of changes in output growth.”
What Accounts for the Changes in U.S. Fiscal Policy Transmission? (2008, background): “A scal policy authority purchases the consumption good, raises lump-sum and income taxes and issues nominal debt.”
OIL PRICE SHOCKS, SYSTEMATIC MONETARY POLICY, AND THE “GREAT MODERATION” (2009, background): “Ahmed et al. (2004) identify smaller shocks with a reduction in the high-frequency range of the spectrum of GDP growth, and monetary policy with the business cycle frequencies.”
Whither monetary and financial stability? the implications of evolving policy regimes (2004, neutral): “…so far have focused primarily on a more favourable environment, in the form of positive or smaller exogenous shocks (eg Stock and Watson (2002) and Ahmed et al (2002)), structural changes such as better inventory management (eg Kahn et al (2002)), better monetary policy (eg Clarida et al (2000))…”
Why have business cycle fluctuations become less volatile? (2006, background): “monetary policy or improved inventory control techniques. Ahmed, Levin, and Wilson (2002)”
Breaks in the Variability and Comovement of G-7 Economic Growth (2003, neutral): “As Ahmed et al. (2004) note, if there has”
Can Financial Innovation Help to Explain the Reduced Volatility of Economic Activity (2005, neutral): “Ahmed, Levin, and Wilson (2004) argued that smaller shocks should reduce volatility at all frequencies, while better monetary policy should reduce volatility principally at the business-cycle frequency and improved inventory management should reduce volatility at relatively high frequencies.”
The "great moderation'' and the US external imbalance (2006, methodology): “# ( 2 ) where and are fixed parameters and "i(st), are jointly normal shocks with”
U.S. Evolving Macroeconomic Dynamics: A Structural Investigation (2007, background): “Second, ‘bringing Alan Greenspan back in time’ would only have had a limited impact on the Great 1See in particular Stock and Watson (2002), Ahmed, Levin, and Wilson (2004), Primiceri (2005), Canova and Gambetti (2005), Gambetti, Pappa, and Canova (2006) and Sims and Zha (2006).”