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Steadier GDP growth.

Since 1984, the quarterly gross domestic product (GDP) growth time series has been only half as volatile as it was in the preceding 25 years, according to an analysis in the Federal Reserve Bank of New York's Current Issues in Economics and Finance. Margaret M. McConnell, Patricia C. Mosser, and Gabriel Perez Quiros report that "the growth rates of all the major components of GDP have followed a steadier course, with the most marked reductions in volatility occurring in residential investment and trade." Once the authors took the share of each component in measures of economic growth into account, however, they found that the components most responsible to the steadier pace of growth over the past 15 years were inventory investment and consumer spending.

Further research demonstrated that the drop in volatility could not be simply traced back to the recent remission in the number and severity of recessions. Therefore, the authors were inclined to suggest that structural, regulatory, and institutional changes have been steadying influences on housing markets, foreign trade, and inventory management. In particular, they feel that improved inventory management, as indicated by such measures as a 33-percent decline in the average lead time for ordering production materials, has allowed firms to react more quickly to unexpected changes in demand.
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Publication:Monthly Labor Review
Article Type:Brief Article
Geographic Code:1USA
Date:Oct 1, 1999
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