On the sources of the Great Moderation

Jordi Galí and Luca Gambetti

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: The remarkable decline in macroeconomic volatility experienced by the U.S. economy since the mid-80s (the so-called Great Moderation) has been accompanied by large changes in the patterns of comovements among output, hours and labor productivity. Those changes are reflected in both conditional and unconditional second moments as well as in the impulse responses to identified shocks. That evidence points to structural change, as opposed to just good luck, as an explanation for the Great Moderation. We use a simple macro model to suggest some of the immediate sources which are likely to be behind the observed changes.

Keywords: Great Moderation; structural VAR; technology shocks; monetary policy rules; labor hoarding (search for similar items in EconPapers)
JEL-codes: E32 (search for similar items in EconPapers)
Date: 2006-09, Revised 2007-06
New Economics Papers: this item is included in nep-cba and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Related works:
Journal Article: On the Sources of the Great Moderation (2009)
Working Paper: On the Sources of the Great Moderation (2008)
Working Paper: On the Sources of the Great Moderation (2008)
Journal Article: On the sources of the Great Moderation (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1041

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