The role of permanent and transitory components in business cycle volatility moderation
The paper examines the processes underlying economic fluctuations by investigating the volatility moderation of U.S. economy in the early 1980's. We decompose the volatility decline using a dynamic factor framework into a common stochastic trend, common transitory component and idiosyncratic components. We find that the moderation of business cycle was a result of the moderation in transitory and idiosyncratic components. Our results suggest that important part of stochastic process that drives economy is transitory. The paper investigates the role of oil prices, monetary and financial market factors. Proposed economic factors do not have a significant relationship to either transitory or permanent components. In addition, we find that transitory shocks are as common during the 80's and 90's as they were during the 60's and 70's.
(This abstract was borrowed from another version of this item.)
Volume (Year): 31 (2006)
Issue (Month): 1 (March)
|Contact details of provider:|| Postal: |
Phone: ++43 - (0)1 - 599 91 - 0
Fax: ++43 - (0)1 - 599 91 - 555
Web page: http://link.springer.de/link/service/journals/00181/index.htm
More information through EDIRC
|Order Information:||Web: http://link.springer.de/orders.htm|
References listed on IDEAS
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.:
- Diebold & Rudebusch, .
"Measuring Business Cycle: A Modern Perspective,"
_061, University of Pennsylvania.
- Sylvain Leduc & Keith Sill, 2007.
"Monetary Policy, Oil Shocks, and TFP: Accounting for the Decline in U.S. Volatility,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 10(4), pages 595-614, October.
- Sylvain Leduc & Keith Sill, 2003. "Monetary policy, oil shocks, and TFP: accounting for the decline in U.S. volatility," Working Papers 03-22, Federal Reserve Bank of Philadelphia.
- Sylvain Leduc & Keith Sill, 2006. "Monetary policy, oil shocks, and TFP: accounting for the decline in U.S. volatility," International Finance Discussion Papers 873, Board of Governors of the Federal Reserve System (U.S.).
- Christopher A. Sims, 1998. "Role of interest rate policy in the generation and propagation of business cycles: what has changed since the '30s?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 42(Jun), pages 121-175.
- Robert E. Lucas Jr., 2003. "Macroeconomic Priorities," American Economic Review, American Economic Association, vol. 93(1), pages 1-14, March.
- Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
- Chauvet, Marcelle & Potter, Simon, 2001.
"Recent Changes in the US Business Cycle,"
University of Manchester, vol. 69(5), pages 481-508, Special I.
- M. Ayhan Kose & Christopher Otrok & Charles H. Whiteman, 2003. "International Business Cycles: World, Region, and Country-Specific Factors," American Economic Review, American Economic Association, vol. 93(4), pages 1216-1239, September.
- Plosser, C.I., 1989.
"Understanding Real Business Cycles,"
RCER Working Papers
198, University of Rochester - Center for Economic Research (RCER).
- In-Moo Kim & Prakash Loungani, 1991.
"The role of energy in real business cycle models,"
Working Paper Series, Macroeconomic Issues
91-6, Federal Reserve Bank of Chicago.
- Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-48, April.
- Hooker, Mark A., 1996. "What happened to the oil price-macroeconomy relationship?," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 195-213, October.
- James H. Stock & Mark W. Watson, 2002.
"Has the Business Cycle Changed and Why?,"
NBER Working Papers
9127, National Bureau of Economic Research, Inc.
- Eric M. Leeper & Christopher A. Sims & Tao Zha, 1996. "What Does Monetary Policy Do?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 1-78.
- Mork, Knut Anton, 1989. "Oil and Macroeconomy When Prices Go Up and Down: An Extension of Hamilton's Results," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 740-44, June.
- Kiseok Lee & Shawn Ni & Ronald A. Ratti, 1995. "Oil Shocks and the Macroeconomy: The Role of Price Variability," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 39-56.
- Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
- Robert G. King & Sergio T. Rebelo, 2000.
"Resuscitating Real Business Cycles,"
NBER Working Papers
7534, National Bureau of Economic Research, Inc.
- Bollerslev, Tim & Zhang, Benjamin Y. B., 2003. "Measuring and modeling systematic risk in factor pricing models using high-frequency data," Journal of Empirical Finance, Elsevier, vol. 10(5), pages 533-558, December.
- Fama, Eugene F & French, Kenneth R, 1996. " Multifactor Explanations of Asset Pricing Anomalies," Journal of Finance, American Finance Association, vol. 51(1), pages 55-84, March.
- Hamilton, James D., 2003.
"What is an oil shock?,"
Journal of Econometrics,
Elsevier, vol. 113(2), pages 363-398, April.
- Cochrane, John H, 1994. "Permanent and Transitory Components of GNP and Stock Prices," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 241-65, February.
- James H. Stock & Mark W. Watson, 2003. "Has the business cycle changed?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 9-56.
- Marcellino, Massimiliano & Stock, James H. & Watson, Mark W., 2003.
"Macroeconomic forecasting in the Euro area: Country specific versus area-wide information,"
European Economic Review,
Elsevier, vol. 47(1), pages 1-18, February.
- Massimiliano Marcellino & James H. Stock & Mark W. Watson, . "Macroeconomic Forecasting in the Euro Area: Country Specific versus Area-Wide Information," Working Papers 201, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Hansen, Bruce E & West, Kenneth D, 2002. "Generalized Method of Moments and Macroeconomics," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(4), pages 460-69, October.
- Ben Bernanke & Jean Boivin & Piotr S. Eliasz, 2005.
"Measuring the Effects of Monetary Policy: A Factor-augmented Vector Autoregressive (FAVAR) Approach,"
The Quarterly Journal of Economics,
MIT Press, vol. 120(1), pages 387-422, January.
- Ben S. Bernanke & Jean Boivin & Piotr Eliasz, 2004. "Measuring the Effects of Monetary Policy: A Factor-Augmented Vector Autoregressive (FAVAR) Approach," NBER Working Papers 10220, National Bureau of Economic Research, Inc.
- Ben S. Bernanke & Jean Boivin & Piotr Eliasz, 2004. "Measuring the effects of monetary policy: a factor-augmented vector autoregressive (FAVAR) approach," Finance and Economics Discussion Series 2004-03, Board of Governors of the Federal Reserve System (U.S.).
- Tom Doan, . "RATS programs to replicate Bernanke, Boivin, Eliasz FAVAR paper," Statistical Software Components RTZ00012, Boston College Department of Economics.
- Forni, Mario & Hallin, Marc & Lippi, Marco & Reichlin, Lucrezia, 1999.
"The Generalized Dynamic Factor Model: Identification and Estimation,"
CEPR Discussion Papers
2338, C.E.P.R. Discussion Papers.
- Mario Forni & Marc Hallin & Marco Lippi & Lucrezia Reichlin, 2000. "The Generalized Dynamic-Factor Model: Identification And Estimation," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 540-554, November.
- Mario Forni & Marc Hallin & Lucrezia Reichlin & Marco Lippi, 2000. "The generalised dynamic factor model: identification and estimation," ULB Institutional Repository 2013/10143, ULB -- Universite Libre de Bruxelles.
- Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
- Timothy Cogley & Thomas Sargent, .
"Evolving Post-World War II U.S. Inflation Dynamics,"
2132872, Department of Economics, W. P. Carey School of Business, Arizona State University.
- Timothy Cogley & Thomas J. Sargent, 2002. "Evolving Post-World War II U.S. Inflation Dynamics," NBER Chapters, in: NBER Macroeconomics Annual 2001, Volume 16, pages 331-388 National Bureau of Economic Research, Inc.
- Hans-Martin Krolzig & Michael P. Clements, 2002. "Can oil shocks explain asymmetries in the US Business Cycle?," Empirical Economics, Springer, vol. 27(2), pages 185-204.
- Kydland, Finn E & Prescott, Edward C, 1982.
"Time to Build and Aggregate Fluctuations,"
Econometric Society, vol. 50(6), pages 1345-70, November.
- Finn E. Kydland & Edward C. Prescott, 1982. "Executable program for "Time to Build and Aggregate Fluctuations"," QM&RBC Codes 4, Quantitative Macroeconomics & Real Business Cycles.
- Finn E. Kydland & Edward C. Prescott, 1982. "Web interface for "Time to Build and Aggregate Fluctuations"," QM&RBC Codes 4a, Quantitative Macroeconomics & Real Business Cycles.
- Friedman, Milton, 1993. "The "Plucking Model" of Business Fluctuations Revisited," Economic Inquiry, Western Economic Association International, vol. 31(2), pages 171-77, April.
- Hoover, Kevin D. & Perez, Stephen J., 1994. "Post hoc ergo propter once more an evaluation of 'does monetary policy matter?' in the spirit of James Tobin," Journal of Monetary Economics, Elsevier, vol. 34(1), pages 47-74, August.
- Raymond, Jennie E & Rich, Robert W, 1997. "Oil and the Macroeconomy: A Markov State-Switching Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(2), pages 193-213, May.
When requesting a correction, please mention this item's handle: RePEc:spr:empeco:v:31:y:2006:i:1:p:217-241. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn)or (Christopher F Baum)
If references are entirely missing, you can add them using this form.