Does the Great Recession imply the end of the Great Moderation? International evidence

Amelie Charles, Olivier Darné and Laurent Ferrara

No 2014-21, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: After years of low macroeconomic volatility since the early eighties, well documented and referred to as the Great Moderation period in the literature, the 2008-2009 worldwide recession adversely impacted output levels in most of advanced countries. This Great Recession period was characterized by a sharp apparent increase in output volatility. In this paper we evaluate whether this sudden event is likely to be temporary. Whether or not this new volatility regime is likely to persist would have strong macroeconomic effects, especially on business cycles. Based on break detection methods applied to a set of advanced countries, our empirical results do not give evidence to the end of the Great Moderation period but rather that the Great Recession is characterized by a dramatic temporary effect on the output growth but not on its volatility. In addition, we show that neglecting those breaks both in mean and in variance can have large effects on output volatility modelling. Last we empirically show that observed breaks during the Great Recession are to some extent related to uncertainty measures.

Keywords: Great Recession; Great Moderation; breaks; volatility; uncertainty. (search for similar items in EconPapers)
JEL-codes: C22 E32 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2014
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: DOES THE GREAT RECESSION IMPLY THE END OF THE GREAT MODERATION? INTERNATIONAL EVIDENCE (2018)
Working Paper: Does the Great Recession imply the end of the Great Moderation? International evidence (2018)
Working Paper: Does the Great Recession imply the end of the Great Moderation? International evidence (2014)
Working Paper: Does the Great Recession imply the end of the Great Moderation? International evidence (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:drm:wpaper:2014-21

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