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What explains the Great Moderation in the US? A structural analysis
Canova, Fabio
Universitat Pompeu Fabra. Departament d'Economia i Empresa
This paper investigates what has caused output and inflation volatility to fall in the USusing a small scale structural model using Bayesian techniques and rolling samples. Thereare instabilities in the posterior of the parameters describing the private sector, the policyrule and the standard deviation of the shocks. Results are robust to the specification ofthe 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.
Macroeconomics and International Economics
new keynesian model
bayesian methods
monetary policy
great moderation
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