The Great Moderation at 40: learning from the cross section

Livio Stracca

No 3124, Working Paper Series from European Central Bank

Abstract: This study examines the drivers of inflation levels, inflation variability, and growth variability collectively representing long-term central bank performance across 37 advanced economies in the Great Moderation era. A key finding is that central bank performance is consistently linked to the overall quality of institutions, while central bank-specific factors such as independence, exchange rate regimes, or inflation targeting show no significant impact. The analysis is extended to the 2022 inflation resurgence, using pre-2022 country characteristics. The results indicate that reliance on imports from Russia (likely gas) and its interaction with post-COVID GDP growth are the primary determinants, suggesting that the inflation surge was not a reversal of the Great Moderation. JEL Classification: E31, E32, E52

Keywords: Great Moderation; inflation; institutions; monetary policy; Rule of Law (search for similar items in EconPapers)
Date: 2025-09
Note: 335958
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20253124

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