Business Cycle Moderation - Good Policies or Good Luck: Evidence and Explanations for the Euro Area

M. Rafiq

Discussion Paper Series from Department of Economics, Loughborough University

Abstract: Economic fluctuations in most of the industrialised world have for over the past 30 years been characterised by declining volatility. This decline has also been a trait witnessed for output fluctuations in the Euro Area. This paper has two objectives. The first is to provide a comprehensive characterisation of the decline in volatility using a large number of Euro area economic time series and a variety of methods designed to describe the time-varying time series processes. The second objective is to provide new evidence on the quantitative importance of various explanations for this ‘great moderation’. This paper focuses on the central elements in the literature contending why real output growth has stabilised. Such factors include shifts in the structure of the economy, improved policies, and a ‘good luck’ factor. Further, this paper goes on to investigate whether cross-country linkages in growth have shifted, perhaps in a way that can help rationalise the stabilisation in output. Taken together, the moderation in volatility is attributable to a combination of improved policy (around 5 - 30 percent) and identifiable forms of good luck that manifest themselves as smaller reduced-form forecast errors (40 percent).

Keywords: Output Volatility; Monetary Policy; International shocks. (search for similar items in EconPapers)
JEL-codes: E32 E60 (search for similar items in EconPapers)
Date: 2006-11
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.lboro.ac.uk/departments/ec/RePEc/lbo/lbowps/Binder1.pdf
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.lboro.ac.uk/departments/ec/RePEc/lbo/lbowps/Binder1.pdf [301 Moved Permanently]--> https://www.lboro.ac.uk/departments/ec/RePEc/lbo/lbowps/Binder1.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lbo:lbowps:2006_21

Access Statistics for this paper

More papers in Discussion Paper Series from Department of Economics, Loughborough University Contact information at EDIRC.
Bibliographic data for series maintained by Huw Edwards (t.h.edwards@lboro.ac.uk).