Greater moderations

► We decompose a 219-year sample of US real output into permanent and transitory shocks. ► We find reductions in the volatility of output growth and inflation in the mid-1980s. ► We find more substantial reductions during what we term the Postwar Moderation. ► During this period output growth volatility fell by 60%, mainly driven by aggregate supply shocks. ► Inflation volatility fell by 76%. Most of this reduction is due to aggregate demand shocks.