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It ain'?t over till it'?s over: A global perspective on the Great Moderation-Great Recession interconnection

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  • Fabio C. Bagliano
  • Claudio Morana

Abstract

A large-scale model of the global economy is used to investigate the structural determinants of the Great Moderation and the transition to the Great Recession (1986-2010). Beside the global economy perspec- tive, the model presents the novel feature of a broad range of included ?nancial variables and risk factors measures. The results point to the relevance of various mechanisms related to the global monetary policy stance (Great Deviation), ?nancial institutions? risk taking behavior (Great Leveraging) and global imbalances (savings glut), in shaping aggregate ?uctuations. The paper ?nally contributes to the literature on early warning indicators, assessing the information content of risk factor innovations for the prediction of the timing and depth of the Great Recession.

Suggested Citation

  • Fabio C. Bagliano & Claudio Morana, 2015. "It ain'?t over till it'?s over: A global perspective on the Great Moderation-Great Recession interconnection," Carlo Alberto Notebooks 424, Collegio Carlo Alberto.
  • Handle: RePEc:cca:wpaper:424
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    Cited by:

    1. Albonico, Alice & Paccagnini, Alessia & Tirelli, Patrizio, 2017. "Great recession, slow recovery and muted fiscal policies in the US," Journal of Economic Dynamics and Control, Elsevier, vol. 81(C), pages 140-161.
    2. Morana, Claudio, 2017. "Macroeconomic and financial effects of oil price shocks: Evidence for the euro area," Economic Modelling, Elsevier, vol. 64(C), pages 82-96.
    3. Morana, Claudio & Sbrana, Giacomo, 2019. "Climate change implications for the catastrophe bonds market: An empirical analysis," Economic Modelling, Elsevier, vol. 81(C), pages 274-294.
    4. Baiardi, Donatella & Morana, Claudio, 2018. "Financial development and income distribution inequality in the euro area," Economic Modelling, Elsevier, vol. 70(C), pages 40-55.

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    More about this item

    Keywords

    Great Moderation; Great Recession; risk factors; early warning system; macro-?nancial instability; FAVAR models.;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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