Wealth and Volatility
نویسندگان
چکیده
Figure 1 documents a strong negative relation in the United States between wealth (household net worth, from the Federal Reserve Flow of Funds, as a fraction of GDP) and aggregate volatility, measured as standard deviation of real GDP growth rate. Periods when net worth is high, reflecting high prices for housing and/or stocks, tend to be periods of low volatility in aggregate output, employment and consumption. Conversely, periods in which asset values are low tend to be periods of high macroeconomic volatility. The 1970s and the late 2000s were periods of low asset values and high volatility. The early 1960s and the Great Moderation of the 1980s and 1990s were periods of high asset values and low volatility.
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