I show that after accounting for predictable variation arising from movements in real interest rates, preferences and income shocks, liquidity constraints and measurement errors, volatility of household consumption in the US increased by 23.5 percent between 1970 and 2004. The increase was lower than that of volatility of family income.However, nonwhite households and household with less than 13 years of education, for whom there was no differential increase in income volatility, experienced significantly larger increase in volatility of household consumption. The effect of race and education remained significant even after income, working history, marital status, family size and composition were controlled for. Substantial differences in wealth and access to credit markets point to the main reason for this divide. Pretis for their excellent research assistance, and the University of Edinburgh for its financial support.

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The continuing strength of the dollar has fueled interest in the relationship between productivity and exchange rates. An analysis of the link between the dollar's movements and productivity developments in the United States, Japan, and the euro area suggests that productivity can account for much of the change in the external value of the dollar over the past three decades.

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An increase in a married woman's attachment to the labor market affected her family's ability to smooth unexpected income shocks. Between 1970 and 1990, the sharp rise in labor market attachment provided an increasingly important channel for smoothing shocks to spousal income. As the participation rate stabilized, this contribution to smoothing evened out. In the Great Recession, both spouses received negative income shocks, and access to transfer income became the main insurance mechanism. Volatility of consumption followed volatility of family income trends but at a lower magnitude. Families' ability to weather income shocks didn't change during the 1970-2010 period.