IDEAS home Printed from https://ideas.repec.org/a/eee/jmacro/v84y2025ics0164070425000163.html
   My bibliography  Save this article

Cautionary tales of fat tails

Author

Listed:
  • Dave, Chetan
  • Dressler, Scott J.
  • Malik, Samreen

Abstract

Distributions of GDP fluctuations that exhibit fat tails shed doubt on the suitability of Normal distributions in empirical and theoretical business-cycle analyses. We document: (i) fat tails in US output fluctuations are not a pervading characteristic of the entire post-war sample, and appear in subsamples exhibiting declines in cyclical and trend volatility (e.g., the Great Moderation); (ii) a DSGE environment featuring Normal shocks that match the declines in observed cyclical and trend volatility can explain almost all of the fat-tailed characteristics observed in the data, leaving little support for the role of rare, large shocks delivering fat-tailed distributions.

Suggested Citation

  • Dave, Chetan & Dressler, Scott J. & Malik, Samreen, 2025. "Cautionary tales of fat tails," Journal of Macroeconomics, Elsevier, vol. 84(C).
    • Handle: RePEc:eee:jmacro:v:84:y:2025:i:c:s0164070425000163
    DOI: 10.1016/j.jmacro.2025.103679
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0164070425000163
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jmacro.2025.103679?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Fat tails; Growth shocks; Real business cycles;
    All these keywords.

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jmacro:v:84:y:2025:i:c:s0164070425000163. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622617 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.