Decline in GDP Volatility

Although the Fed has not targeted money aggregates for some time, several explanations have been offered for the decline in the volatility of GDP since the early 1980s. These include financial deregulation/innovation, improvements in supply chain management that have substantially reduced inventory backlogs associated with economic down turns, inflation booms that have been tempered by global competition and the absence of major macroeconomic shocks like an OPEC oil embargo. Although greater Fed transparency, beginning with the publication of Federal Open Market Committee meeting minutes in 1994 reduced uncertainty regarding Fed policy, this has had more of an impact on volatility in financial markets rather than volatility in the real economy.