A NOTE ON MEASURING US TIME SERIES VOLATILITY DURING THE GREAT MODERATION

Abstract

We identify volatility breaks in all testable series in the FRED database over the 1957–2013 period. This yields 17,681 breaks, which we categorize using text analysis. We show that 70.5% of series categories experienced a decline in volatility over the 1985–1999 period, suggesting that the Great Moderation was far broader in scope than the literature has documented. We also show that this decline reversed in 2000, leading to a sharp increase in volatility for most time series categories; however, this did not fully materialize in GDP volatility until the Great Recession. Finally, we identify labor markets, demographics, finance, and government debt as potential drivers of low-frequency shifts in volatility over the 1957–2013 period.