The Great Moderation and The Relationship between Output Growth and Its Volatility
Wen-Shwo Fang () and
Stephen Miller ()
Additional contact information
Wen-Shwo Fang: Department of Economics, Feng Chia University, 100 Wen-Hwa Road, Taichung, Taiwan
Southern Economic Journal, 2008, vol. 74, issue 3, 819-838
This study examines the effect of the Great Moderation on the relationship between U.S. output growth and its volatility over the period 1947 to 2006. First, we consider the possible effects of structural changes in the volatility process. We employ generalized autoregressive conditional heteroscedasticity in mean (GARCH-M) specifications, which describe output growth rate and its volatility with and without a one-time structural break in volatility. Second, our data analyses and empirical results suggest no significant relationship between the output growth rate and its volatility; this favors the traditional wisdom of dichotomy in macroeconomics. Moreover, the evidence shows that the time-varying variance falls sharply or even disappears once we incorporate a one-time structural break in the unconditional variance of output starting in 1982 or 1984. That is, the integrated GARCH effect proves spurious. Finally, a joint test of a trend change and a one-time shift in the volatility process finds that the one-time shift dominates.
JEL-codes: C32 E32 O40 (search for similar items in EconPapers)
References: Add references at CitEc
Citations: View citations in EconPapers (33) Track citations by RSS feed
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
Working Paper: The Great Moderation and the Relationship between Output Growth and Its Volatility (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:sej:ancoec:v:74:3:y:2008:p:819-838
Access Statistics for this article
Southern Economic Journal is currently edited by Laura Razzolini
More articles in Southern Economic Journal from Southern Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Laura Razzolini (). This e-mail address is bad, please contact .