Output Fluctuations in the United States: What Has Changed Since the Early 1980's?

Abstract

We document a structural break in the volatility of U.S. GDP growth in the first quarter of 1984, and provide evidence that this break emanates from a reduction in the volatility of durable goods production. We find no evidence of increased stability in the nondurables, services or structures sectors of the economy. In addition, no other G7 country experienced a contemporaneous reduction in output volatility. Finally, we show that the reduction in durables volatility corresponds to a decline in the share of durable goods accounted for by inventories