The Decline in U.S. Output Growth Volatility: A Wavelet Analysis

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The aim of the paper is to determine whether or not the volatility of the growth rate of US output has changed in the periodsince late 1940's, and to attribute a precise date, if possible, toany such change.By applying the Discrete Wavelet Transform (DWT) to the annualized quarter-to quarter output growth series, we can test the homogeneity of the variance on a scale by scale basis without needing to fit a parametric model to the observed time series. A version of the Inclan and Tiao (1994) Normalised and Centered Cumulative Sum of Squares test, adapted to wavelet analysis, leads us to reject the null hypothesis of constant variance in the two levels of decomposition of the highest resolution or frequency and to locate a single break in 1982. The economic implications are explored.
Original languageEnglish
Pages (from-to)226-242
Number of pages17
JournalManchester School
Publication statusPublished - 2013

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics


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