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THE VOLATILITY OF THE OUTPUT GAP IN THE G7
Ray Barrell and Sylvia Gottschalk
National Institute Economic Review
No. 188 (April 2004), pp. 100-107
Published by: Sage Publications, Ltd.
Stable URL: http://www.jstor.org/stable/23876689
Page Count: 8
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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.
National Institute Economic Review © 2004 Sage Publications, Ltd.