I will return later to possible explanations for the sharp drop in the estimated effects of movements in energy prices. 3 Finally, one of the most striking changes in the U.S. economy in recent decades has been the reduction in the economy’s volatility.
The standard deviation of quarterly growth of real (that is, inflation adjusted) gross domestic product for the United States since the mid-1980s has been about half that experienced during the 1960s and 1970s. The volatility of inflation has fallen to a similar degree; moreover, the reduction in volatility for both output and inflation is widespread across countries.