WHAT EXPLAINS THE GREAT MODERATION IN THE U.S.? A STRUCTURAL ANALYSIS | Zendy

Canova Fabio | Zendy

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WHAT EXPLAINS THE GREAT MODERATION IN THE U.S.? A STRUCTURAL ANALYSIS

Author(s) -

Canova Fabio

Publication year - 2009

Publication title -

journal of the european economic association

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 7.792

H-Index - 93

eISSN - 1542-4774

pISSN - 1542-4766

DOI - 10.1162/jeea.2009.7.4.697

Subject(s) - great moderation , economics , volatility (finance) , econometrics , covariance , bayesian probability , inflation (cosmology) , private sector , variance (accounting) , monetary policy , macroeconomics , monetary economics , statistics , mathematics , physics , accounting , theoretical physics , economic growth

This paper investigates what has caused output and inflation volatility to fall in the U.S. using a small scale structural model using Bayesian techniques and rolling samples. There are instabilities in the posterior of the parameters describing the private sector, the policy rule, and the variance of the shocks. Results are robust to the specification of the policy rule. Changes in the parameters describing the private sector are the largest, but those of the policy rule and the covariance matrix of the shocks explain the changes most. (JEL: E52, E47, C53)

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