EconPapers    
Economics at your fingertips  
 

The Great Diversification and Its Undoing

Vasco Carvalho and Xavier Gabaix

American Economic Review, 2013, vol. 103, issue 5, 1697-1727

Abstract: We investigate the hypothesis that macroeconomic fluctuations are primitively the results of many microeconomic shocks. We define fundamental volatility as the volatility that would arise from an economy made entirely of idiosyncratic sectoral or firm-level shocks. Fundamental volatility accounts for the swings in macroeconomic volatility in the major world economies in the past half-century. It accounts for the "great moderation" and its undoing. The initial great moderation is due to a decreasing share of manufacturing between 1975 and 1985. The recent rise of macroeconomic volatility is chiefly due to the growth of the financial sector.

JEL-codes: E23 E32 E44 (search for similar items in EconPapers)
Date: 2013
Note: DOI: 10.1257/aer.103.5.1697
References: View complete reference list from CitEc
Citations: View citations in EconPapers (192)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/aer.103.5.1697 (application/pdf)
http://www.aeaweb.org/aer/data/aug2013/20101135_data.zip (application/zip)
http://www.aeaweb.org/aer/data/aug2013/20101135_app.pdf (application/pdf)
http://www.aeaweb.org/aer/ds/august2013/20101135_ds.zip (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: The Great Diversification and its Undoing (2015) Downloads
Working Paper: The Great Diversification and its Undoing (2010) Downloads
Working Paper: The Great Diversification and its Undoing (2010) Downloads
Working Paper: The Great Diversification and its Undoing (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:103:y:2013:i:5:p:1697-1727

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().

 
Page updated 2025-03-19
Handle: RePEc:aea:aecrev:v:103:y:2013:i:5:p:1697-1727