Does the Great Recession imply the end of the Great Moderation? International evidence

Amélie Charles (1) , Olivier Darné (2) , Laurent Ferrara (3, 4)

1 Audencia Recherche
2 LEMNA - Laboratoire d'économie et de management de Nantes Atlantique
3 EconomiX
4 Centre de recherche de la Banque de France

In this paper we examine whether or not the Great Recession had a temporary or permanent effect on output growth volatility after years of low macroeconomic volatility since the early eighties. Based on break detection methods applied to a set of advanced countries, our empirical results do not give evidence to the end of the Great Moderation period but rather that the Great Recession is characterized by a dramatic short‐lived effect on the output growth but not on its volatility. We show that neglecting the breaks both in mean and in variance can have large effects on output volatility modeling based on GARCH specifications

Domains: Quantitative Finance [q-fin]; Statistical Finance [q-fin.ST]; Humanities and Social Sciences; Economics and Finance

Amélie Charles, Olivier Darné, Laurent Ferrara. Does the Great Recession imply the end of the Great Moderation? International evidence. Economic Inquiry, 2018, 56 (2), pp.745-760. ⟨10.1111/ecin.12551⟩. ⟨hal-01757081⟩