Is the Great Moderation Now Over?

by: Dr. Bill Conerly

A year ago I interviewed Mark Thoma of Economist's View blog about the Great Moderation. (You can listen to it here by scrolling down to the bottom.) For you non-economists, the Great Moderation is the period of calmer economic activity that we've experienced since 1983. Quarter-to-quarter changes in GDP are closer to average, the frequency of recessions has gone down, and the severity of recessions has become less. It's pretty cool.

With the recent turmoil in the economy, I was curious if he had changed his views about whether the Great Moderation was continuing, and would continue. You can listen here.

For a graphical view of the Great Moderation, I calculated the standard deviation of quarter-to-quarter changes in real GDP over rolling 5-year periods. It's stunning how much we've calmed down.
GDP volatility