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The Volatility of the Output Gap in the G7

Published online by Cambridge University Press:  26 March 2020

Ray Barell  and
Sylvia Gottschalk
Ray Barell*
Affiliation:
National Institute of Economic and Social Research
Sylvia Gottschalk*
Affiliation:
National Institute of Economic and Social Research
*
e-mail: r.barrell@niesr.ac.uk
e-mail: s.gottschalk@niesr.ac.uk
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Abstract

We investigate declining output volatility in the G7 since 1970 in a panel context, seeking to explain the causes of the decline. We show that there is a significant role for both net financial wealth and trade openness as well as inflation volatility, even though previous studies have ignored the fact that it may be endogenous and its role therefore spurious. However, its importance clearly varies over time and across countries, and it appears less important as an explanation of declining volatility in the US than it does in the UK. Changes in openness appear to be at least as important in explaining the decline in US output volatility.

Type
Journal Article
Information
National Institute Economic Review , Volume 188 , April 2004 , pp. 100 - 107
Copyright
Copyright © 2004 National Institute of Economic and Social Research

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Footnotes

∗

The work was undertaken as part of the ESRC Programme on The Evolving Macro Economy under grant number L138250122 awarded to NIESR 1999-2004. We have benefited from discussions with Martin Weale, Ian Hurst and James Mitchell. All remaining errors are ours.

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