Sources of Macroeconomic Fluctuations: A Regime-Switching DSGE Approach

Zheng Liu, Daniel Waggoner and Tao Zha

No 2009-01, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: We examine the sources of macroeconomic economic fluctuations by estimating a variety of medium-scale DSGE models within a unified framework that incorporates regime switching both in shock variances and in the inflation target. Our general framework includes a number of different model features studied in the literature. We propose an efficient methodology for estimating regime-switching DSGE models. The model that best fits the U.S. time-series data is the one with synchronized shifts in shock variances across two regimes and the fit does not rely on strong nominal rigidities. We find little evidence of changes in the inflation target. We identify three types of shocks that account for most of macroeconomic fluctuations: shocks to total factor productivity, wage markup, and the capital depreciation rate.

Keywords: Econometric models; Business cycles (search for similar items in EconPapers)
JEL-codes: C11 C51 E32 E42 E52 (search for similar items in EconPapers)
Pages: 51
Date: 2010-04-01
New Economics Papers: this item is included in nep-bec, nep-cba, nep-dge, nep-mac, nep-mon and nep-opm
Note: Original paper published 2009, under original title- Sources of the Great Moderation: shocks, friction, or monetary policy?
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Related works:
Journal Article: Sources of macroeconomic fluctuations: A regime‐switching DSGE approach (2011)
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DOI: 10.24148/wp2009-01

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