For the United States, the chapter
showed that consumption is less volatile
than GDP, but that investment is more volatile
than GDP. Using the St. Louis Federal Reserve
Bank’s FRED database (http://research.stlouisfed.
org/fred2/) examine the behavior of consumption
and investment spending in Japan.
a. For 1994 to the present, download quarterly
data on real private final consumption
(JPNPFCEQDSNAQ), real gross fixed capital
formation (JPNGFCFQDSNAQ), and
real GDP (JPNRGDPQDSNAQ) for Japan.
b. Calculate the compound annual growth
rate for each quarter for all three data
series. Economists often use the standard
deviation as a measure of volatility.
Calculate the standard deviation for all
three series of growth rates.
c. Is consumption more or less volatile than
GDP? Is this result consistent with consumption
smoothing? Explain. Is investment
more or less volatile than GDP?
d. The growth rate of real GDP is one measure
of the business cycle. Is the behavior of
consumption and investment over the business
cycle similar or different than in the
United States. Briefly explain.