Article ID Journal Published Year Pages File Type
958253 Journal of Economics and Business 2006 15 Pages PDF
Abstract

This paper asks whether the remarkable decrease in business-cycle variability after the end of World War II has been the result of a more stable structure (the propagation mechanism) or less volatile shocks (the impulses). Using data from the pre-World War I, interwar, and post-World War II periods, for the US, Australia, Italy, Sweden, and the UK, our evidence suggests that the reduced volatility is mostly the result of calmer shocks, and less the consequence of a more stable structure. In the US, for example, we calculate that milder shocks have been responsible for around 80% of the reduction in output variability between interwar and postwar periods, while a more stable structure is responsible for the remaining 20%.

Related Topics
Social Sciences and Humanities Business, Management and Accounting Strategy and Management
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