Good Luck or Good Policy?:
An Expectational Theory of Macro Volatility Switches
What are the determinants of switches in the volatility of macro-variables? In principle, a persistent reduction in the amplitude of business .uctuations can be thought to be either the result of good policy, namely a change of policy by some major actor within the economy, or of good luck, that is, a decrease of volatility of the exogenous shocks hitting the economy. In a sense, good policy is not strictly necessary, but it is sufficient to prevent bad luck if appropriately conducted.
The Great Moderation: Good Luck, Good Policy, or Less Oil Dependence? Andrea Pescatori(2008)
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. Good luck refers to the possibility that the remarkably benign series of economic shocks that have hit the economy in recent years has been the result of nothing other than chance. Some economists conjecture that stable oil prices have helped to produce these calm waters, because so much of industrialized countries’ output requires oil as an input to production, and most of these countries import their oil. While today’s rising oil prices may seem to spell the end of these good times, the percentage change in recent oil prices has been much less abrupt than in the 1970s