The Decline in Australian Output Volatility

John Simon

RBA Research Discussion Papers from Reserve Bank of Australia

Abstract: There has been a large decline in the volatility of Australian output over the past 40 years. This paper looks at the causes of this decline. Accounting for part of the change have been substantial changes in the inventories cycle. Abstracting from changes in the inventories cycle there have also been significant declines in underlying output volatility. This paper focuses on the underlying structural factors for the reduction in volatility. It finds that the principal cause of the decline has been a decline in the shocks hitting the economy rather than an increase in structural stability. Furthermore, the primary explanation seems to lie in a reduction in the volatility of supply or ‘productivity’ shocks. The ultimate source of these productivity shocks is left as an open question.

Keywords: business cycles; output growth; structural VAR; volatility (search for similar items in EconPapers)
JEL-codes: E32 E65 E66 (search for similar items in EconPapers)
Date: 2001-03
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Citations: View citations in EconPapers (34)

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Persistent link: https://EconPapers.repec.org/RePEc:rba:rbardp:rdp2001-01

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