Why Has Output Become Less Volatile?

has become noticeably less volatile. During that time, the economy has experienced two recessions, compared with four in each of the two preceding twenty year periods. Further, the loss in output during the last two recessions has been smaller than what prior experience would lead one to expect. Moreover, the reduction in output volatility is not confined to business cycle frequencies.This can be seen in Figure 1, which shows the standard deviation of real output growth over the previous 20 quarters for each quarter over the 1950:Q1–2005:Q2 period.