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

Listed author(s):
  • Fabio Bagliano
  • Claudio Morana

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 perspective, the model presents the novel feature of a broad range of included financial variables and risk factors measures. The results point to the relevance of various mechanisms related to the global monetary policy stance (Great Deviation), financial institutions' risk taking behavior (Great Leveraging) and global imbalances (savings glut), in shaping aggregate fluctuations. The paper finally 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.

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File URL: http://dems.unimib.it/repec/pdf/mibwpaper303.pdf
File Function: First version, 2015
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Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 303.

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Length: 76
Date of creation: Jul 2015
Date of revision: Jul 2015
Handle: RePEc:mib:wpaper:303
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  21. Claudio Morana, 2014. "Factor Vector Autoregressive Estimation of Heteroskedastic Persistent and Non Persistent Processes Subject to Structural Breaks," Working Papers 273, University of Milano-Bicocca, Department of Economics, revised May 2014.
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