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The Great Moderation Flattens Fat Tails: Disappearing Leptokurtosis

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Listed:
  • WenShwo Fang

    (Department of Economics, Feng Chia University)

  • Stephen M. Miller

    (Department of Economics, University of Nevada, Las Vegas)

  • ChunShen Lee

    (Department of Economics, Feng Chia University)

Abstract

Recently, Fagiolo et al. (2008) find fat tails in the distribution of economic growth rates after adjusting for outliers, autocorrelation, and heteroskedasticity. This paper employs US quarterly real output growth, showing that this finding of fat tails may reflect the Great Moderation. That is, leptokurtosis disappears after GARCH adjustment once we incorporate the break in the variance equation to account for the Great Moderation.

Suggested Citation

  • WenShwo Fang & Stephen M. Miller & ChunShen Lee, 2009. "The Great Moderation Flattens Fat Tails: Disappearing Leptokurtosis," Working Papers 0903, University of Nevada, Las Vegas , Department of Economics.
    • Handle: RePEc:nlv:wpaper:0903
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    real GDP growth; the Great Moderation; leptokurtosis; GARCH models;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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