The Great Moderation Flattens Fat Tails: Disappearing Leptokurtosis

WenShwo Fang (), Stephen Miller and ChunShen Lee ()
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WenShwo Fang: Department of Economics, Feng Chia University
ChunShen Lee: Department of Economics, Feng Chia University

No 903, Working Papers from University of Nevada, Las Vegas , Department of Economics

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.

Keywords: real GDP growth; the Great Moderation; leptokurtosis; GARCH models (search for similar items in EconPapers)
JEL-codes: C32 E32 O40 (search for similar items in EconPapers)
Pages: 9 pages
Date: 2009-01
New Economics Papers: this item is included in nep-bec, nep-cba, nep-hpe and nep-mac
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Working Paper: The Great Moderation Flattens Fat Tails: Disappearing Leptokurtosis (2008)
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