The Decline in Australian Output Volatility

John A. Simon

39 citations0/0 files storedRePEc: Research Papers in Economics

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Monetary Policy and Economic Impact Economic Theory and Policy Economic Growth and Productivity

Abstract

There has been a large decline in the volatility of Australian output over the past 40 years. This paper looks at the causes of this decline. Accounting for part of the change have been substantial changes in the inventories cycle. Abstracting from changes in the inventories cycle there have also been significant declines in underlying output volatility. This paper focuses on the underlying structural factors for the reduction in volatility. It finds that the principal cause of the decline has been a decline in the shocks hitting the economy rather than an increase in structural stability. Furthermore, the primary explanation seems to lie in a reduction in the volatility of supply or ‘productivity’ shocks. The ultimate source of these productivity shocks is left as an open question.

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References

1989A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle 1988The Dynamic Effects of Aggregate Demand and Supply Disturbances n.d.Output Fluctuations in the United States: What Has Changed since the Early 1980's?1985Macroeconomic determinants of growth: Cross-country evidence 2001The Long and Large Decline in U.S. Output Volatility 1992How Well Does The IS-LM Model Fit Postwar U. S. Data?1988The dynamic effects of aggregate demand and supply disturbance 1984Are Business Cycles All Alike?

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2009Political institutions and economic volatility 2008Fiscal rules, discretionary fiscal policy and macroeconomic stability: an empirical assessment for OECD countries 2006The Evolution of Exchange Rate Policy and Capital Controls in Australia 2005DECLINING OUTPUT VOLATILITY: WHAT ROLE FOR STRUCTURAL CHANGE?2004Breaks in the Variability and Co-Movement of G-7 Economic Growth 2004

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