A Simultaneous Unobserved Components Analysis of US Output and the Great Moderation
AbstractIn an unobserved components framework of US output trend and cycle, this paper seeks to determine the causal interaction between permanent and transitory innovations. For the purpose of identification, strategies of augmenting the cyclical dynamics as well as allowing for shifts in volatility are proposed. In the early 1980s, substantial predominance of cycle shocks gives way to strong negative spillovers of trend impulses, consistent with real business cycle theories. The coincident reduction of macroeconomic volatility mainly traces back to pronounced dampening of transitory disturbances. This ascribes an important role to the mitigation of policy interventions in explaining the Great Moderation.
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Bibliographic InfoPaper provided by University of Regensburg, Department of Economics in its series University of Regensburg Working Papers in Business, Economics and Management Information Systems with number 432.
Date of creation: 10 Jul 2009
Date of revision:
Unobserved Components; Trend; Cycle; Identification; Great Moderation;
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
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