Fed's new approach leads to stable economy post-1980s, reducing volatility.
The researchers studied US economic fluctuations after 1980 and found that the economy was more stable due to the Federal Reserve's focus on output growth. They discovered that shocks to investment efficiency played a smaller role in economic ups and downs during the "Great Moderation" period. The decrease in volatility was linked to increased flexibility in wages and a decrease in inflation variability, driven by the Fed's anti-inflation policies and changes in people's preferences.