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The Time Varying Volatility of Macroeconomic Fluctuations

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Alejandro Justiniano
Giorgio E. Primiceri

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Abstract

In this paper we investigate the sources of the important shifts in the volatility of U.S. macroeconomic variables in the postwar period. To this end, we propose the estimation of DSGE models allowing for time variation in the volatility of the structural innovations. We apply our estimation strategy to a large-scale model of the business cycle and find that investment specific technology shocks account for most of the sharp decline in volatility of the last two decades.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12022.

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Date of creation: Feb 2006
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Publication status: published as Justiniano, Alejandro and Giorgio E. Primiceri. “The Time Varying Volatility of Macroeconomic Fluctuations.†The American Economic Review 98, 3 (June 2008): 604-641.
Handle: RePEc:nbr:nberwo:12022

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Find related papers by JEL classification:
E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions

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