Working Paper: CEPR ID: DP10092
Authors: Mara Dolores Gadea; Ana Gómez Loscos; Gabriel Pérez-Quiros
Abstract: The collapse of the global economy in 2008, following the outbreak of the financial crisis, and the ensuing economic developments of the so-called Great Recession (GR) led many economists to suggest that the Great Moderation (GM) had, indeed, come to an end. This paper offers evidence that the decrease in output volatility still remains in force despite the GR and would do so even if the GR continues to extended horizons. This finding has important implications not only for academics, concerning the implementation of theoretical and empirical techniques, but also for policymakers, regarding the understanding of the pattern of recovery from the current and future recessions
Keywords: Business Cycle; Markov Switching Models; Recoveries; Volatility
JEL Codes: C22; E32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Great Moderation (GM) (E32) | persistence of low output volatility (E32) |
| structural changes in the economy (L16) | persistence of low output volatility (E32) |
| Great Recession (GR) (G01) | Great Moderation (GM) (E32) |
| sluggish recoveries (E65) | low volatility (G19) |