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The Great Moderation: good luck, good policy, or less oil dependence?(ECONOMIC COMMENTARY)

Three explanations have been suggested for the moderation in real GDP and inflation that has occurred in industrialized countries since the 1980s: good luck, better monetary policy, and structural changes in the economy. Recent research finds that better monetary policy explains most of the moderation in inflation, and good luck and the less-intensive use of oil (a structural change) have played a major role in the moderation of GDP.

Sometime in the early 1980s, real GDP and inflation in industrialized countries began to fluctuate less widely than in the past. Economists have been debating the causes of this dramatic change, commonly referred to as the "Great Moderation," ...

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