Working Paper: NBER ID: w11946
Authors: Stephen G. Cecchetti; Alfonso Flores-Lagunes; Stefan Krause
Abstract: In much of the world, growth is more stable than it once was. Looking at a sample of twentyfive countries, we find that in sixteen, real GDP growth is less volatile today than it was twenty years ago. And these declines are large, averaging more than fifty per cent. What accounts for the fact that real growth has been more stable in recent years? We survey the evidence and competing explanations and find support for the view that improved inventory management policies, coupled with financial innovation, adopting an inflation targeting scheme and increased central bank independence have all been associated with more stable real growth. Furthermore, we find weak evidence suggesting that increased commercial openness has coincided with increased output volatility.
Keywords: No keywords provided
JEL Codes: E320; E440
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Improved inventory management policies (M11) | Decrease in output volatility (E39) |
| Better monetary policy (E52) | Decrease in output volatility (E39) |
| Financial innovation (G29) | Decrease in output volatility (E39) |
| Increased commercial openness (F69) | Greater output volatility (E39) |