Year: 2004
Type: article
Abstract: We test for a change in the volatility of 214 U.S. macroeconomic time series over the period 1959–1999. We find that approximately 80% of these series have experienced a break in unconditional volatility during this period. Even though more than half of the series experienced a break in conditional mean, most of the reduction in volatility appears to be due to changes in conditional volatility. Our results are robust to controlling for business cycle nonlinearity in both mean and variance. Volatility changes are more appropriately characterized as instantaneous breaks than as gradual changes. Nominal variables such as inflation and interest rates experienced multiple volatility breaks and witnessed temporary increases in volatility during the 1970s. On this evidence, we conclude that the increased stability of economic fluctuations is widespread.
Authors: Marianne Sensier, Dick van Dijk
Institutions: University of Manchester, Erasmus University Rotterdam
Language: English
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2110067385