Declines in the Volatility of the US Economy: A Detailed Look

摘要

This paper uses GDP-by-state and industry data, and looks at the decline in volatility of the U.S. economy that occurred in about 1984. It finds that this decline primarily results from declines in covariances between industries, or between states, rather than declines in variances of the individual industries or states. Similarly, it finds that changing shares of more- and less-volatile industries account for little of the overall decline in volatility. It suggests that some of the general explanations suggested by some analysts--such as better inventory management or improved labor markets--are best suited for specific industries or industry groups, rather than the overall economy. General explanations that would tend to work in many industriessuch as better business planning due to lower price volatility or improved information technology--might account for much of the decline in overall volatility. Nevertheless, many industries experienced increased volatility.