3  McConnell and Perez-Quiros (2000) and Kahn, McConnell, and Perez-Quiros (2002) make this argument. McCarthy and Zakrajsek (2003) provide an overview and evaluation of this literature; they conclude that better inventory management has reinforced the trend toward lower volatility but is not the ultimate cause. Willis (2003) discusses structural changes that may have contributed to reduced variability of inflation.
BIS Review 12/2004  1  policy performed quite poorly, relative to both earlier and later periods (Romer and Romer, 2002).4 Few disagree that monetary policy has played a large part in stabilizing inflation, and so the fact that output volatility has declined in parallel with inflation volatility, both in the United States and abroad, suggests that monetary policy may have helped moderate the variability of output as well.