We study the implications of increased price flexibility on aggregate output volatility in a dynamic stochastic general … flexibility ; aggregate volatility ; systematic monetary policy ; DSGE model ; Bayesian estimation …

We review evidence on the Great Moderation together with evidence about volatility trends at the micro level to develop … a potential explanation for the decline in aggregate volatility since the 1980s and its consequences. The key elements … are declines in firm-level volatility and aggregate volatility—most dramatically in the durable goods sector—but with no …