2004, The Less Volatile U.S. Economy: A Bayesian Investigation

Using a Bayesian model comparison strategy, we search for a volatility reduction in U.S. real gross do-mestic product (GDP) growth within the postwar sample. We nd that aggregate real GDP growth has been less volatile since the early 1980s, and that this volatility reduction is concentrated in the cyclical component of real GDP. Sales and production growth in many of the components of real GDP display sim-ilar reductions in volatility, suggesting the aggregate volatility reduction does not have a narrow source. We also document structural breaks in in ation dynamics that occurred over a similar time frame as the GDP volatility reduction