Amazing GDP fact of the month

Econtalk this week mentioned an incredible fact, that the US GDP has a very tight growth band around 3%:

loggdpplotI was surprised that I’ve never known this before. The reason, I think, is that usually we see plots of year on year GDP growth, which look like this:

gdpgrowthplot

It is difficult to see that not only does the average (well, the geometric mean of 1+growth, to be exact) come to 3%, but also that the averages for shorter intervals of time also come to 3%; the deviations are highly anti-correlated and cancel themselves out fairly quickly, but this is not visually obvious.

Additional reading:

http://www.econbrowser.com/archives/2009/03/trend_stationar.html
http://krugman.blogs.nytimes.com/2009/03/03/roots-of-evil-wonkish/
http://econlog.econlib.org/archives/2009/03/greg_mankiw_get.html

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