Has the Business Cycle Changed? Evidence and Explanations

Over the past 30 years, economic activity has become less volatile in most G7 countries. In the US, for example, the standard deviation of the growth rate of GDP, averaged over four quarters, was one-third less during 1984 to 2002 than it was during 1960 to 1983. This decline in volatility is widespread across sectors within the US and is also found in the other G7 economies, although the timing and details differ from one country to the next. Interestingly, despite these changes and increasing international economic integration, output fluctuations have not become more correlated or synchronized across countries.