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Friday, October 28, 2005

The Variance of Output and Commodity Flows

This is a picture of commodity flows down the Mississippi from 1947-2002 measured in thousands of tons shipped. This particular graph is for the Mid-Mississippi region, but the pictures are similar for the lower and upper Mississippi, and for other rivers I have looked at as part of this project:

In the figure, commodity flows appear to have less variability prior to 1984. This is noteworthy because since 1984, the volatility in output has been reduced considerably, by around 50% by some estimates. Yet according to this picture commodity flows have not realized a corresponding fall in variability, but have increased instead. This leads to the hypothesis that volatility on the output side has been traded for volatility on the input side. [Note: If you are interested in explanations for the decline in GDP volatility since 1984 such as good luck, good policy, and better technology (inventory management), a place to start is Ramey and Vine (2004).]

    Posted by on Friday, October 28, 2005 at 12:17 AM in Economics | Permalink  TrackBack (0)  Comments (2)

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