Working Paper: CEPR ID: DP6600
Authors: Domenico Giannone; Michele Lenza; Lucrezia Reichlin
Abstract: This paper shows that the explanation of the decline in the volatility of GDP growth since the mid-eighties is not the decline in the volatility of exogenous shocks but rather a change in their propagation mechanism.
Keywords: Great Moderation; Information; Shocks
JEL Codes: C32; C53; E32; E37
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| shocks (E32) | volatility of GDP growth (E20) |
| propagation mechanisms (C59) | volatility of GDP growth (E20) |
| decline in shock volatility (G17) | decline in GDP growth volatility (F62) |
| changes in propagation mechanisms (O33) | predictability of GDP (E20) |
| model size (C52) | importance of shocks vs propagation (F41) |
| good luck hypothesis (D80) | predictability of GDP (E20) |