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Keywords:Gross domestic product 

Journal Article
What's in a number? : the investment boom isn't quite what it seems
AUTHORS: Lynne E. Browne
DATE: 2000-07

Working Paper
Inventory investment and output volatility
This paper reports the results of a detailed examination of the hypothesis that improved inventory management and production techniques are responsible for the decline in the volatility of U.S. GDP growth. Our innovations are to look at the data at a finer level of disaggregation than previous studies, to exploit cross-sectional heterogeneity to obtain clearer identification of this hypothesis, and to provide a complete accounting of the change in GDP volatility. Changes in inventory behavior can account directly for only up to half of the total reduction in GDP volatility. Cross-section evidence from the manufacturing and trade sector indicates that change in the covariance structure among industries accounts for most of the remaining portion of the reduction in GDP volatility. Sales have become less correlated among industries and inventory investment has become more correlated. These distinctive changes in co-movement of industries suggest that development and management of supply chains may be an indirect channel through which changes in inventory management and production techniques have influenced GDP volatility.
AUTHORS: Irvine, Owen; Schuh, Scott
DATE: 2002

Working Paper
Interest sensitivity and volatility reductions: cross-section evidence
As has been widely observed, the volatility of GDP has declined since the mid-1980s compared with prior years. One leading explanation for this decline is that monetary policy improved significantly in the later period. We utilize a cross-section of 2-digit manufacturing and trade industries to further investigate this explanation. Since a major channel through which monetary policy operates is variation in the federal funds rate, we hypothesized that industries that are more interest sensitive should have experienced larger declines in the variance of their outputs in the post-1983 period. We estimate interest-sensitivity measures for each industry from a variety of VAR models and then run cross-sectional regressions explaining industry volatility ratios as a function of their interest-sensitivity measures. These regressions reveal little evidence of a statistically significant relationship between industry volatility reductions and our measures of industry interest sensitivity. This result poses challenges for the hypothesis that improved monetary policy explains the decline in GDP volatility.
AUTHORS: Schuh, Scott; Irvine, F. Owen
DATE: 2005

Working Paper
Sales persistence and the reductions in GDP volatility
A number of explanations for the observed decline in GDP volatility since the mid-1980s have been offered. Valerie Ramey and Daniel Vine (2003a, 2003b) in a couple of recent papers offer the hypothesis that a decline in the persistence of sales is an explanation for the decline in GDP volatility. Their models show that a decrease in sales persistence leads to a decline in the variance of production relative to the variance of sales. They provide econometric evidence that the persistence of unit automobile sales has declined at both the aggregate and model level. This paper explores reasons why sales persistence may have declined and then tests the Ramey-Vine hypothesis with monthly chain-weighted sales data from 2- and 3-digit manufacturing and trade industries. The estimates confirm the Ramey-Vine findings for motor vehicle retailers, wholesalers, and manufacturers. For a number of industries outside of motor vehicles, especially those in wholesaling and nondurable manufacturing, considerable evidence is found of declines in sales persistence. These declines seem to be consistent with changes in supply and distribution chains that have occurred as the result of the introduction of new information, inventory, and production control systems. However, in equations estimated for aggregate manufacturing, wholesaling, and retail sector sales, declines in sales persistence are not found.
AUTHORS: Irvine, F. Owen
DATE: 2004

Working Paper
Fiscal retrenchment and the level of economic activity
I analyze the effects of an expected future reduction in government spending on the current level of economic activity. In a closed-economy dynamic general equilibrium setup with nominal rigidities, it is shown that expected future cuts in government spending generate an increase in current GDP. Nominal rigidities are an essential feature for the emergence of such a result. With perfect flexible prices but in an otherwise identical setup, an expected future decline in government spending entails no increase in the current level of economic activity.
AUTHORS: Olivei, Giovanni P.
DATE: 1999

Working Paper
Technological diversification
Why is GDP so much more volatile in poor countries than in rich ones? To answer this question, we propose a theory of technological diversification. Production makes use of different input varieties, which are subject to imperfectly correlated shocks. As in endogenous growth models, technological progress increases the number of varieties, raising average productivity. The new insight is that an expansion in the number of varieties also lowers the volatility of output. This is because additional varieties provide diversification benefits against variety-specific shocks. In the model, technological complexity evolves endogenously in response to profit incentives. Complexity (and hence output stability) is positively related with the development of the country, the comparative advantage of the sector, and the sector?s skill and technology intensity. Using sector-level data for a broad sample of countries, we provide extensive empirical evidence confirming the cross-country and cross-sectoral predictions of the model.
AUTHORS: Tenreyro, Silvana; Koren, Miklos
DATE: 2004

Working Paper
The roles of comovement and inventory investment in the reduction of output volatility
Most of the reduction in GDP volatility since the 1983 is accounted for by a decline in comovement of output among industries that hold inventories. This decline is not simply a passive byproduct of reduced volatility in common factors or shocks. Instead, structural changes occurred in the long-run and dynamic relationships among industries? sales and inventory investment behavior?especially in the automobile and related industries, which are linked by supply and distribution chains featuring new production and inventory management techniques. Using a HAVAR model (Fratantoni and Schuh 2003) with only two sectors, manufacturing and trade, we discover structural changes that reduced comovement of sales and inventory investment both within and between industries. As a result, the response of aggregate output to all types of shocks is dampened. Structural changes accounted for more than 80 percent of the reduction in output volatility, thus weakening the case for ?good luck,? and altered industries? responses to federal funds rate shocks, thus suggesting the case for ?better monetary policy? is complicated by changes in the real side of the economy.
AUTHORS: Schuh, Scott; Irvine, F. Owen
DATE: 2005

Working Paper
Do real-time Okun's law errors predict GDP data revisions?
Using U.S. real-time data, we show that changes in the unemployment rate unexplained by Okun's Law have significant predictive power for GDP data revisions. A positive (negative) error in Okun's Law in real time implies that GDP will be later revised to show less (more) growth than initially estimated by the statistical agency. The information in Okun's Law errors about the true state of real economic activity also helps to improve GDP forecasts in the near term. Our findings add a new dimension to the interpretation of real-time Okun's Law errors, as they show that these errors can convey information other than a change in potential GDP, the equilibrium unemployment rate, or the use of labor's intensive margin.
AUTHORS: Gumbau-Brisa, Fabia; Barnes, Michelle L.; Olivei, Giovanni P.
DATE: 2013

Journal Article
Is the recession over in El Paso?
In December 2007, the U.S. economy entered a mild recession, a downturn that would ultimately trigger the worst financial crisis since the Great Depression and a fall into one of the longest and deepest recessions of the past 60 years. Growth returned to the U.S. in mid-2009 but remains too slow to make inroads into stubbornly high unemployment. Virtually no geographic area of the country was left untouched by the U.S. downturn, including El Paso, although the local economy performed much better than other border cities, such as McAllen, Brownsville and Laredo. Government-related spending, especially the huge expenditures at Fort Bliss, provided an important brake on the local economic decline.
AUTHORS: Canas, Jesus; Coronado, Roberto; Gilmer, Robert W.
DATE: 2010-05

Journal Article
Will China ever become as rich as the U.S.?
Twenty years ago, a visitor to Beijing would have been struck by the bicycle?s popularity as a form of mass transportation. Today, auto congestion and pollution on the increasingly clogged roads of China?s capital city are pervasive features. In a little more than three decades, China has transformed itself from a largely closed agrarian society to an urban exporting nation commonly viewed as the workshop of the world. ; At current growth rates, China will be the world?s largest economy sometime in the next decade. But will it ever be the richest? Though providing a definitive answer is difficult?at least in terms of standard of living?examining how China and other developing economies grow offers insight into how, with maturity, these nations may approach the technological leadership and, by extension, the standard of living of the U.S.
AUTHORS: Wynne, Mark A.
DATE: 2011

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