The paper "The Long and Large Decline in U.S. Output Volatility" by Olivier Blanchard and John Simon examines the significant decrease in U.S. output volatility over the past five decades. The authors argue that this decline is not a recent phenomenon but has been steady since the 1950s, interrupted only briefly in the 1970s and early 1980s. They find that the standard deviation of quarterly output growth has decreased by a factor of three, which they attribute to a reduction in the volatility of government spending, consumption, and investment, as well as a change in the correlation between inventory investment and sales. The authors also explore the relationship between output volatility and inflation volatility, finding a strong correlation. This correlation explains the interruption of the trend decline in output volatility in the 1970s and early 1980s, when inflation volatility increased. They conclude that the decline in output volatility is due to a combination of factors, including changes in monetary policy, improvements in financial markets, and structural changes in the economy. The paper further discusses the implications of these findings, suggesting that the increased length of expansions is likely to continue due to the sustained decline in output volatility. Lower output volatility is associated with lower risk and potential changes in risk premia, such as in precautionary saving. However, the authors note that the decrease in output volatility has not been reflected in a parallel decrease in asset price volatility.The paper "The Long and Large Decline in U.S. Output Volatility" by Olivier Blanchard and John Simon examines the significant decrease in U.S. output volatility over the past five decades. The authors argue that this decline is not a recent phenomenon but has been steady since the 1950s, interrupted only briefly in the 1970s and early 1980s. They find that the standard deviation of quarterly output growth has decreased by a factor of three, which they attribute to a reduction in the volatility of government spending, consumption, and investment, as well as a change in the correlation between inventory investment and sales. The authors also explore the relationship between output volatility and inflation volatility, finding a strong correlation. This correlation explains the interruption of the trend decline in output volatility in the 1970s and early 1980s, when inflation volatility increased. They conclude that the decline in output volatility is due to a combination of factors, including changes in monetary policy, improvements in financial markets, and structural changes in the economy. The paper further discusses the implications of these findings, suggesting that the increased length of expansions is likely to continue due to the sustained decline in output volatility. Lower output volatility is associated with lower risk and potential changes in risk premia, such as in precautionary saving. However, the authors note that the decrease in output volatility has not been reflected in a parallel decrease in asset price volatility.