scholarly journals On the Sources of the Great Moderation

2009 ◽  
Vol 1 (1) ◽  
pp. 26-57 ◽  
Author(s):  
Jordi Galí ◽  
Luca Gambetti
Keyword(s):  
Labor Productivity ◽  
Good Luck ◽  
Output Volatility ◽  
Great Moderation ◽  
Impulse Responses ◽  
Us Economy ◽  
Second Moments ◽  
The Us ◽  
Complex Picture

The Great Moderation in the US economy has been accompanied by large changes in the comovements among output, hours, and labor productivity. Those changes are reflected in both conditional and unconditional second moments as well as in the impulse responses to identified shocks. Among other changes, our findings point to an increase in the volatility of hours relative to output, a shrinking contribution of nontechnology shocks to output volatility, and a change in the cyclical response of labor productivity to those shocks. That evidence suggests a more complex picture than that associated with “good luck” explanations of the Great Moderation. (JEL: E23, E24, J22, J24)

POLICY SWITCH AND THE GREAT MODERATION: THE ROLE OF EQUILIBRIUM SELECTION

2011 ◽  
Vol 16 (3) ◽  
pp. 449-471 ◽  
Author(s):  
Efrem Castelnuovo
Keyword(s):  
Equilibrium Selection ◽  
Selection Strategy ◽  
Relative Importance ◽  
Good Luck ◽  
Output Volatility ◽  
Great Moderation ◽  
Good Policy ◽  
Sign Restriction ◽  
Selection Of

“Good policy” and “good luck” have been identified as two of the possible drivers of the “Great Moderation,” but their relative importance is still widely debated. This paper investigates the role played by equilibrium selection under indeterminacy in the assessment of their relative merits. We contrast the outcomes of counterfactual simulations conditional on the “continuity” selection strategy–largely exploited by the literature–with those obtained with a novel “sign restriction” based strategy. Our results suggest that conclusions achieved under “continuity” are not necessarily robust to the selection of different–still economically sensible–equilibria. According to our simulations, the switch to a hawkish systematic monetary policy may very well induce an increase in output volatility. Hence, our sign restriction–selection strategy “resurrects” the inflation–output policy tradeoff.

scholarly journals The decline in volatility in the US economy. A historical perspective

2019 ◽  
Vol 72 (1) ◽  
pp. 101-123
Author(s):  
María Dolores Gadea ◽  
Ana Gómez-Loscos ◽  
Gabriel Pérez-Quirós
Keyword(s):  
World War Ii ◽  
Business Cycle ◽  
Structural Breaks ◽  
Great Moderation ◽  
World War ◽  
Long Period ◽  
Us Economy ◽  
The Us ◽  
The Business Cycle

Abstract In this paper, we analyse the volatility of US GDP growth using quarterly series starting in 1875. We find structural breaks in volatility at the end of World War II and at the beginning of the Great Moderation period. We show that the Great Moderation volatility reduction is only linked to changes in expansions, whereas that after World War II is due to changes in both expansions and recessions. We also propose several methodologies to date the US business cycle in this long period. We find that taking volatility into account improves the characterization of the business cycle.

scholarly journals Retrospectives: The Cyclical Behavior of Labor Productivity and the Emergence of the Labor Hoarding Concept

2014 ◽  
Vol 28 (2) ◽  
pp. 197-212 ◽  
Author(s):  
Jeff E. Biddle
Keyword(s):  
Labor Productivity ◽  
The Great Recession ◽  
Us Economy ◽  
The Us ◽  
History Of ◽  
Accepted Part ◽  
Cyclical Behavior ◽  
Labor Hoarding ◽  
The Relationship ◽  
Modern Form

The concept of “labor hoarding,” at least in its modern form, was first fully articulated in the early 1960s by Arthur Okun (1963). By the end of the 20th century, the concept of “labor hoarding” had become an accepted part of economists' explanations of the workings of labor markets and of the relationship between labor productivity and economic fluctuations. The emergence of this concept involved the conjunction of three key elements: the fact that measured labor productivity was found to be procyclical, rising during expansions and falling during contractions; a perceived contradiction with the theory of the neoclassical firm in a competitive economy; and a possible explanation based on optimizing behavior on the part of firms. Each of these three elements—fact, contradiction, and explanation—has a history of its own, dating back to at least the opening decades of the twentieth century. Telling the story of the emergence of the modern labor hoarding concept requires recounting these three histories, histories that involve the work of economists motivated by diverse purposes and often not mainly, if at all, concerned with the questions that the labor hoarding concept was ultimately used to address. As a final twist to the story, the long-standing positive relationship between labor productivity and output in the US economy began to disappear in the late 1980s; and during the Great Recession, labor productivity rose while the economy contracted.

scholarly journals The Decline of the U.S. Labor Share Across Sectors

2019 ◽  
pp. 1-37 ◽  
Author(s):  
Ivan Mendieta-Muñoz ◽  
Codrina Rada ◽  
Rudi von Arnim
Keyword(s):  
Labor Productivity ◽  
Real Wage ◽  
Structural Changes ◽  
Manufacturing Sector ◽  
Dominant Role ◽  
Early Period ◽  
Relative Prices ◽  
Labor Share ◽  
Us Economy ◽  
The Us

This paper provides novel insights on the changing functional distribution of income in the post– war US economy. We present a Divisia index decomposition of the US labor share (1948–2017) by fourteen sectors. The decomposition method furnishes exact contributions from four components towards aggregate changes of the labor share: sectoral real compensation, sectoral labor productivity, the structure of the economy as measured by employment shares, and the structure of markets as measured by relative prices. Results are presented for the entire period as well as the “golden age” (1948–1979) and a “neoliberal era” (1979–2017), painting a rich and detailed picture of structural changes in the US economy. The manufacturing sector plays a dominant role: despite its continuously falling employment share, growth of real compensation matches that of labor productivity in the early period but falls far behind during the neoliberal era. Further, employment shifts towards stagnant sectors with relatively low real wages and productivity. We discuss these results in the context of Baumol’s and Lewis’s seminal contributions on dual economies. While the cost disease is apparent—employment shifts towards stagnant sectors, their relative prices rise, and the aggregate growth rate (of productivity) decreases—the originally suggested mechanism of upward real wage convergence is muted. The observed changes are instead compatible with a “reverse-Lewis” shift, where stagnant sectors act as a labor surplus sink, and dynamic sector labor experiences slowing real wage growth.

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