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The Time Varying Volatility of Macroeconomic Fluctuations

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Author Info
Alejandro Justiniano () (Board of Governors of the Federal Reserve Board, Giorgio Primiceri)
Northwestern University
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 and 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 Society for Computational Economics in its series Computing in Economics and Finance 2006 with number 219.

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Date of creation: 04 Jul 2006
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Handle: RePEc:sce:scecfa:219

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Keywords: Great Moderation; Stochastic Volatility; Investment Specific Technology Shock; Relative Price of Investment; DSGE Models;

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Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Steven J. Davis & James A. Kahn, 2007. "Macroeconomic implications of changes in micro volatility," Proceedings, Federal Reserve Bank of San Francisco, issue Nov. [Downloadable!]
  2. Thomas A. Lubik & Paolo Surico, 2006. "The Lucas critique and the stability of empirical models," Working Paper 06-05, Federal Reserve Bank of Richmond. [Downloadable!]
  3. Coeurdacier, Nicolas & Kollmann, Robert & Martin, Philippe, 2008. "International Portfolios, Capital Accumulation and Foreign Assets Dynamics," CEPR Discussion Papers 6902, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. Olaf Posch, 2006. "Explaining Output Volatility: the Case of Taxation," Quantitative Macroeconomics Working Papers 20608, Hamburg University, Department of Economics. [Downloadable!]
    Other versions:
  5. Benoît Mojon, 2007. "Monetary policy, output composition and the Great Moderation," Working Paper Series WP-07-07, Federal Reserve Bank of Chicago. [Downloadable!]
  6. Parantap Basu, 2007. "Understanding Labour Market Frictions: A Tobin’s Q Approach," Money Macro and Finance (MMF) Research Group Conference 2006 35, Money Macro and Finance Research Group. [Downloadable!]
  7. repec:bep:macadv:v:7:y:2007:i:1:p:1593-1593 is not listed on IDEAS
  8. Antón Nákov & Andrea Pescatori, 2007. "Oil and the Great Moderation," Banco de España Working Papers 0735, Banco de España. [Downloadable!]
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  9. Marco Del Negro & Frank Schorfheide, 2008. "Monetary policy analysis with potentially misspecified models," Staff Reports 321, Federal Reserve Bank of New York. [Downloadable!]
    Other versions:
  10. Nir Jaimovich & Henry E. Siu, 2007. "The young, the old, and the restless: demographics and business cycle volatility," Staff Report 387, Federal Reserve Bank of Minneapolis. [Downloadable!]
    Other versions:
  11. Troy Davig, 2008. "Detecting recessions in the Great Moderation: a real-time analysis," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 5-33. [Downloadable!]
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