The Time-Varying Volatility of Macroeconomic Fluctuations
- (pp. 604-41)
AbstractWe investigate the sources of the important shifts in the volatility of US macroeconomic variables in the postwar period. To this end, we propose the estimation of DSGE models allowing for time variation in the volatility of the structural innovations. We apply our estimation strategy to a large-scale model of the business cycle and find that shocks specific to the equilibrium condition of investment account for most of the sharp decline in volatility of the last two decades.
CitationJustiniano, Alejandro, and Giorgio E. Primiceri. 2008. "The Time-Varying Volatility of Macroeconomic Fluctuations." American Economic Review, 98 (3): 604-41. DOI: 10.1257/aer.98.3.604
- E13 General Aggregative Models: Neoclassical
- E32 Business Fluctuations; Cycles