Great volatility, great moderation and great moderation again

We investigate the sources of changes in GDP volatility observed from 1966 to 2018. We develop a general equilibrium model and calibrate it to US data to characterize the contribution of micro level productivity shocks, inter-sectoral linkages and households' behavior to aggregate volatility. Our results show that changes in sectoral volatility played an important role in shaping GDP volatility and that asymmetries in the economy had a different impact on aggregate volatility over time. Moreover, we show that, despite an increase before the financial crisis of 2007, aggregate volatility has remained low until 2018.