Download or read book Essays on Macroeconomic Volatility and the Great Moderation written by Michael W. Clark and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation is a collection of two essays on the macroeconomic volatility and the Great Moderation. The first essay examines the causes of the Great Moderation in United States, while the second essay takes an international approach in examining if the Great Moderation was one or multiple events for the industrialized countries. The first essay analyzes the causes of the large decline in aggregate volatility for the United States, phenomenon known as the Great Moderation, one of the most widely recognized characteristics of the modern U.S. economy. However, the literature found no consensus on what caused it. In order to uncover the causes of the Great Moderation we use a new measure of volatility based on the first difference of quarterly growth rates, and a novel approach, exploiting a test for common features. We first test each series for structural change(s) in volatility, and then test for a common feature of a decrease in volatility between the volatility of output and volatility of potential causes of the Great Moderation for both the period prior to the Great Recession (2007:4) and the whole sample through 2010:4. When all the evidence is considered, structural changes in the economy, including increased globalization and improved inventory management, improved monetary policy, and good luck, all appear to have played a significant role, while financial market innovations are unlikely to be a cause of the Great Moderation. The second essay analyzes if the Great Moderation is one event internationally, common across countries, or multiple events. The Great Moderation has been identified in several advanced economies as a general decrease in the volatility of GDP growth, and it is still viewed as one time event. We use structural break test to date the onset of the Great Moderation in eleven developed countries and employ the test for common features in order to determine if the moderation in volatility is common across countries (one event), or if it is more than one event. While we establish that all of the countries studied display a break dating from the late 1970s to mid- 1980s and early 1990s, we discover the moderation of volatility evident in international data is neither concurrent, nor of similar magnitude. We can use this new information to enlighten our search for the cause(s) of the Great Moderation by both eliminating potential causes and increasing the ability to distinguish between causality and coincidence.

Download or read book Essays on Macroeconomic Volatility and Monetary Economics written by Jeta Menkulasi and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Macroeconomic Volatility written by Claudio E. Raddatz and published by . This book was released on 2003 with total page 150 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis consists of three empirical essays on different aspects of macroeconomic volatility. The first essay provides evidence of a causal and economically important relation between financial development and macroeconomic volatility by looking at the effect of financial development in the volatility of sectors with different liquidity needs. The results show that sectors with high liquidity needs are relatively more volatile in financially underdeveloped countries. These sectoral effects of financial underdevelopment can significantly increase macroeconomic volatility, despite the fact that financial underdevelopment also induces countries to move away from sectors with high liquidity needs. The second essay explores the causes of the decline in U.S. manufacturing volatility during the last two decades. The essay presents and estimates a model that decomposes the changes in the volatilities of manufacturing sectors among the effects of output composition, aggregate shocks, sectoral shocks, and sectoral linkages. The results show that changes in the volatility of aggregate shocks and their impact across sectors account for the most of the decline in U.S. manufacturing volatility. A smaller role is played by changes in the volatility of sectoral shocks and in the intensity of sectoral linkages. The third essay analyzes both the sectoral effects of monetary policy and the role that monetary policy plays in the transmission of sectoral shocks. Our methodology is applied to the case of the U.S., finding considerable differences in the response of different sectors to monetary policy. The results also show that monetary policy is an important source of sectoral transfers: a shock to Equipment-and-Software Investment, naturally identified with the high-tech crises, induces a monetary policy response that generates a temporary boom in Residential Investment and Consumption of Durables, but which has almost no effect on the high-tech sector.

Download or read book Essays in Empirical Macroeconomics written by Dony Alex and published by . This book was released on 2016 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis is a collection of three self contained chapters in the area of empirical macroeconomics. Chapter 2 examines the behaviour of the volatility of the structural shocks and the macroeconomic variables in the post-reform period in India in a time-varying framework. A time varying parameters structural vector autoregression with stochastic volatility model is used to investigate the evolving dynamics of the macroeconomy of India in the post-reform period. We detect a sharp reduction in estimated stochastic volatility during the post-reform years for all shocks and variables. In terms of the stochastic volatility, we find that the period 2001 to 2006 seems to have the lowest volatility in the whole sample and can be dubbed as the short 'Great Moderation' period of India. We find that the estimated stochastic volatility of supply shocks is more than the demand shocks. We also note that demand shocks rather seem to be persistent than supply shocks during the period from 2007-14. Chapter 3 explores the role of nominal GDP as an implicitly preferred monetary policy target in the US during the Great Moderation period. Monetary policy via stabilization of inflation expectations by targeting inflation, has been argued as one of the prominent factors contributing for the Great Moderation in the U.S. Studies using Taylor rule type monetary policy reaction functions have found inflation to be the major target variable of the Federal Reserve. This study counters this view, and shows that for accomplishing its objective of stabilizing inflation expectations, the Federal Reserve was instead implicitly targeting nominal GDP. This claim is corroborated by estimating different variants of nominal GDP rules, which then is compared with Taylor rules using both ex-post revised data and real time briefing forecasts of FOMC. The results counter the conventional view, and observe that post Volcker era or during the period of Great Moderation (1984-2007), the Federal Reserve had a stronger implicit preference for nominal GDP as compared to inflation Chapter 4 examines whether nominal GDP can pass the forecasting test to be a monetary policy framework. Forecast targeting became an important component of central banks from 1990's onwards as a systematic approach to monetary policy deliberations and as a good communication medium with the public. Any robust monetary policy regime has to have good forecasting performance of its nominal anchor. Nominal GDP targeting has been suggested as a suitable alternative to the present inflation 'targeting' monetary policy framework. But as a good framework its nominal anchor should have good forecasting ability. This chapter tries to compare the forecast performance between the nominal anchors of inflation and nominal GDP targeting regimes for U.S. This task is undertaken by using a series of models from simple autoregressive models to state space models. U.S Inflation is hard to forecast, but it seems that NGDP is much more harder to forecast.

Download or read book Macroeconomic Volatility Predictability and Uncertainty in the Great Moderation written by Sean D. Campbell and published by . This book was released on 2004 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Macroeconomic Volatility Predictability and Uncertainty in the Great Moderation written by Andrew Figura and published by . This book was released on 2004 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: short-term interest rates"--Abstract.

Download or read book On the Sources of the Great Moderation written by Jordi Galí and published by . This book was released on 2008 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The remarkable decline in macroeconomic volatility experienced by the U.S. economy since the mid-80s (the so-called Great Moderation) has been accompanied by large changes in the patterns of comovements among output, hours and labor productivity. Those changes are reflected in both conditional and unconditional second moments as well as in the impulse responses to identified shocks. Among other changes, our findings point to (i) an increase in the volatility of hours relative to output, (ii) a shrinking contribution of non-technology shocks to output volatility, and (iii) a change in the cyclical response of labor productivity to those shocks. That evidence suggests a more complex picture than that associated with "good luck" explanations of the Great Moderation"--National Bureau of Economic Research web site

Download or read book The Great Moderation and the US External Imbalance written by Alessandra Fogli and published by . This book was released on 2006 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The early 1980s marked the onset of two striking features of the current world macro-economy: the fall in US business cycles volatility (the great moderation) and the large and persistent US external imbalance. In this paper we argue that an external imbalance is a natural consequence of the great moderation. If a country experiences a fall in volatility greater than the one of its partners, its incentives to do precautionary savings fall and this results in a permanent deterioration of its external balance. In order to assess how much of the current US imbalance can be explained by this channel, we consider a standard two country business cycle model in which households are subject to business cycles shocks they cannot perfectly insure against. The model suggests that a fall in business cycle volatility like the one observed in the US can account for about 20% of the actual US external imbalance."--Authors' abstract.

Download or read book Essays on Volatility in Credit Constrained Economies written by Shalini Mitra and published by . This book was released on 2012 with total page 160 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Great Diversification and Its Undoing written by Vasco M. Carvalho and published by . This book was released on 2010 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: We investigate the hypothesis that macroeconomic fluctuations are primitively the results of many microeconomic shocks, and show that it has significant explanatory power for the evolution of macroeconomic volatility. We define â??fundamentalâ?? volatility as the volatility that would arise from an economy made entirely of idiosyncratic microeconomic shocks, occurring primitively at the level of sectors or firms. In its empirical construction, motivated by a simple model, the sales share of different sectors vary over time (in a way we directly measure), while the volatility of those sectors remains constant. We find that fundamental volatility accounts for the swings in macroeconomic volatility in the US and the other major world economies in the past half century. It accounts for the â??great moderationâ?? and its undoing. Controlling for our measure of fundamental volatility, there is no break in output volatility. The initial great moderation is due to a decreasing share of manufacturing between 1975 and 1985. The recent rise of macroeconomic volatility is due to the increase of the size of the financial sector. We provide a model to think quantitatively about the large comovement generated by idiosyncratic shocks. As the origin of aggregate shocks can be traced to identifiable microeconomic shocks, we may better understand the origins of aggregate fluctuations

Download or read book Learning and the Great Moderation written by James B. Bullard and published by . This book was released on 2009 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on the Financial Incompleteness and Its Macroeconomic Effects written by and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The first chapter studies why the Great Recession came with a relatively large reduction in output growth given the size of the fall in total factor productivity (TFP) growth. We build a simple model with contractual frictions: limited commitment, limited liability and a corporate tax proportional to equity value. These constraints put restrictions on building up capital, but not on decreasing it. This asymmetry makes firms which have accumulated large capital stocks reduce them more in recessions. The model predicts that a relatively tranquil TFP history during the Great Moderation helped firms build up large capital stocks and generates up to a 60% larger output amplification in the Great Recession than in the 1973-1975 recession. The regression results confirm this history dependence of output amplification. Most neoclassical models in macroeconomics generate recessions from news of an increase in future TFP, because positive wealth effects make agents work and save less from such good news. In the second chapter, we propose a new way of explaining business cycles from news shocks by adopting the incomplete enforcement of contracts. In the model, firms can default with borrowed capital but defaulting firms are excluded from the market. Lenders must consider this incentive to default. If a profitable future is expected from news of increasing future TFP, firms will not default today. The smaller incentive to default facilitates investment and creates a large substitution effect which overwhelms the positive wealth effect. In the third chapter, we study the effects from the expansion in borrowing limit on output volatility in incomplete market. Extra borrowing capacity generates a decrease in total saving due to less precautionary saving motive, and an increase in interest rate. The rich saves more due to the higher interest rate, whereas the poor saves less due to the smaller precautionary saving motive. The rich is more susceptible to shocks in exogenous productivity than before, and hence counteracts fluctuations with more counter-cyclical labor supply. This effect dominates changes in the aggregate variables. The model can explain qualitative changes in aggregate volatility and wealth distribution during the Great Moderation.

Download or read book Four essays on macroeconomic volatility and instability under alternative exchange rate regimes written by Olivier Pierre Marie Loisel and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Economic Fluctuations written by Daniel Burren and published by . This book was released on 2009 with total page 143 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in Applied Macroeconomic Theory written by Hugo Vega and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis contains three essays that employ macroeconomic theory to study the implications of volatility, financial frictions and reserve requirements. The first essay uses an imperfect information model where agents solve a signal extraction problem to study the effect of volatility on the economy. A real business cycle model where the agent faces imperfect information regarding productivity is used to address the question. The main finding is that the variance of the productivity process components has a small negative short run impact on the economy's real variables. However, imperfect information dampens the effects of volatility associated to permanent components of productivity and amplifies the effects of volatility associated to transitory components. The second essay presents a partial equilibrium characterization of the credit market in an economy with partial financial dollarization. Financial frictions (costly state verification and banking regulation restrictions), are introduced and their impact on lending and deposit interest rates denominated in domestic and foreign currency studied. The analysis shows that reserve requirements act as a tax that leads banks to decrease deposit rates, while the wedge between foreign and domestic currency lending rates is decreasing in exchange rate volatility and increasing in the degree of correlation between entrepreneurs' returns and the exchange rate. The third essay introduces an interbank market with two types of private banks and a central bank into a New-Keynesian DSGE model. The model is used to analyse the general equilibrium effects of changes to reserve requirements, while the central bank follows a Taylor rule to set the policy interest rate. The paper shows that changes to reserve requirements have similar effects to interest rate hikes and that both monetary policy tools can be used jointly in order to avoid big swings in the policy rate or a zero bound.

Download or read book Essays on the Changing Nature of Business Cycle Fluctuations written by Jared D. Reber and published by . This book was released on 2014 with total page 252 pages. Available in PDF, EPUB and Kindle. Book excerpt: The behavior of several important macroeconomic variables has changed dramatically over the past several business cycles in the U.S. These changes, which began around the mid-1980s, have been viewed as somewhat puzzling given the stark contrast they exhibit to earlier post-war data. The movement of output and employment has historically been highly correlated throughout the different phases of the business cycle. However, this changed with the economic recovery of 1991. Since then, periods of output recovery have been accompanied by periods of prolonged job loss. These periods have come to be known as "jobless recoveries". Several competing explanations for this phenomenon have come forth, however, all face similar limitations. To date, there has been no method presented to quantify a period of jobless recovery. This makes comparisons across business cycles difficult and also prevents formal statistical testing of the proposed explanations. This study creates a meaningful measure of a jobless recovery which can be used to test these hypotheses. Furthermore, jobless recoveries have only been studied using the national aggregate data. This neglects potentially valuable information which may exist in the cross-section between states. Using the jobless recovery measure, a state-level empirical analysis is conducted to determine which, if any, of the existing explanations of jobless recoveries are supported by the data. It has also been noted that the growth of output has experienced dramatic changes over roughly the same period. The broad decline in the volatility of output since the mid-1980s, named the Great Moderation, has become the subject of a large literature. However, the literature has examined mostly data at the national-level. Using a proxy of quarterly output, this paper provides state-level evidence of the Great Moderation and shows that large, cross-state differences exist in the degree to which each state experiences the Great Moderation. Explanations for why the Great Moderation exists in the national data are examined to see how well they explain the observed cross-state differences in the evolution of output volatility.

Download or read book The Great Inflation written by Michael D. Bordo and published by University of Chicago Press. This book was released on 2013-06-28 with total page 545 pages. Available in PDF, EPUB and Kindle. Book excerpt: Controlling inflation is among the most important objectives of economic policy. By maintaining price stability, policy makers are able to reduce uncertainty, improve price-monitoring mechanisms, and facilitate more efficient planning and allocation of resources, thereby raising productivity. This volume focuses on understanding the causes of the Great Inflation of the 1970s and ’80s, which saw rising inflation in many nations, and which propelled interest rates across the developing world into the double digits. In the decades since, the immediate cause of the period’s rise in inflation has been the subject of considerable debate. Among the areas of contention are the role of monetary policy in driving inflation and the implications this had both for policy design and for evaluating the performance of those who set the policy. Here, contributors map monetary policy from the 1960s to the present, shedding light on the ways in which the lessons of the Great Inflation were absorbed and applied to today’s global and increasingly complex economic environment.