What Explains The Great Moderation in the U.S.? A Structural Analysis

Fabio Canova

101 citations0/0 files storedJournal of the European Economic Association

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Monetary Policy and Economic Impact Economic Theory and Policy Market Dynamics and Volatility

Abstract

This paper investigates what has caused output and inflation volatility to fall in the U.S. using a small scale structural model using Bayesian techniques and rolling samples. There are instabilities in the posterior of the parameters describing the private sector, the policy rule, and the variance of the shocks. Results are robust to the specification of the policy rule. Changes in the parameters describing the private sector are the largest, but those of the policy rule and the covariance matrix of the shocks explain the changes most.

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References

1999The Science of Monetary Policy: A New Keynesian Perspective 2000Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory*2007Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach 1999Inflation dynamics: A structural econometric analysis 2005Time Varying Structural Vector Autoregressions and Monetary Policy 2005Drifts and volatilities: monetary policies and outcomes in the post WWII US n.d.Output Fluctuations in the United States: What Has Changed since the Early 1980's?1999Monetary Policy Rules

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